Easing may cause developing world asset bubbles: IMF (via
AFP)
Monetary easing in the developed world could cause overheating and asset bubbles in emerging economies, the International Monetary Fund’s managing director said in Tokyo on Sunday. “Accommodative monetary policies… could strain the capacity of those economies to absorb the potentially large flows…
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Great article 🙂 I believe Mantega and Christine Lagarde are making a great point, and that Ben Bernanke is too protective of the US monetary policies. There is already talk of the second housing bubble developing in California because of those artificial low interest rates and low FHA down payment requirements. The mortgage industry sees that as having to be compensated by increasing housing prices, and then tries to “show” that the economy is improving as “proof”, while incomes are not rising and student loans still keep aspiring young potential home buyers from being able to afford to purchase.
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Bert: In a global economy anything we do will have an impact throughout the global system–positive or negative. The Fed\’s belief that they can control all outcomes (with none of them being negative) is beyond arrogant. Markets do not take favorably to excessive \’tinkering\’ and will always seek equilibrium. This may not turn out well for the world economy.
Like you, I find the current housing market to be very interesting. I agree that housing prices are being artificially inflated. Perhaps a housing double-dip is not out of the question.
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