Fed officials present the current housing slump as the outcome of irresponsible lending by mortgage brokers and various other mysterious forces. On this logic it is the role of the Fed to monitor the situation in the housing market and, if required, to interfere in order to prevent the housing slump from spilling over to the rest of the economy. Here I suggest that what we are currently observing in the housing market is the deflation of the housing bubble, which could be a precursor to a widely spread liquidity crunch. The creation and deflation of the bubble is the result of the Fed’s boom-bust monetary policies. FULL ARTICLE
What Caused the Liquidity Crunch?
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