Sunday, August 26, 2007

Dollar drives Sub Prime Mess

John Tamny has an article at TCS that looks at the correlation between housing prices and the value of the dollar:

Greedy capitalists are increasingly blamed for the moderation of real estate prices that has led to the subprime meltdown, but a more realistic culprit is our own Federal Reserve. Dollar mismanagement there drove lenders and individual consumers into the housing market; both understandably chasing the rising returns that always result when the unit of account (in our case, the dollar) is cascading downward. History has once again repeated itself.

This of course makes perfect sense. It'll be interesting to see what happens to the dollar - and real estate - when the Fed starts to cut rates. Tamny argues that the dollar and stocks will rally. I'm not so sure.

No comments: