THE FED and Treasury and Wall Street generally would have America believe that exchanging live money for the big banks’ low-value paper is harmless. It’s all monetary stimulus. No one really understands quantitative easing, so how could harm follow ? Described in 2023 as follows:
“In the past, the Fed has purchased Treasury securities and mortgage-backed securities. These purchases effectively swap the bank’s investment holdings for cash while increasing the overall money supply. With more cash, banks are more inclined to make loans.”
History of Quantitative Easing in the United States
The American Deposit Management Co., 2023
Such are the nation’s wonders.
But now we are seeing twenty years of these money supply increases land in the Real World: this is more than $7 trillion dollars that have cycled through the exchanges to land in direct competition with GEN Z and Millennial efforts to buy housing.
That’s not $7 billion. We’re used to seeing “billion.” It really is “trillion” with a “t.”
And the housing market very clearly has departed from its historical norms in response. We saw median housing prices level to approx 3 times median annual income back 60 years ago. And that ratio moved very little over the decades.
Until the Great Recession. 2007 — 2010. Well, actually, a couple years earlier if you lived in California. Their investment bankers invented the No Income Verification mortgage class.
For GEN Z and Millennials this is a horror.
Median housing prices are now related to prior years’ median housing prices. Worker income has nothing to do with it. And the actual numbers are dominated by what real estate shells can pay at auction, which is based in turn on what they have to pay for their lines of credit out of Investment banks.
Local zoning ordinances also prevent what had been normal civic expansion. We haven’t seen a Levittown style project in 30 years. And that was Texas.
Which rolls us back around to the “Dr. Rick” ads. Ostensibly these ads serve the needs of Progressive Insurance Co. The actor’s name is Bill Glass. But what the ads do without exception is to suggest that GEN Z and Millennials get to buy houses effortlessly. That their most difficult challenge in life is resisting temptations “to turn into their parents.”
Which is ridiculous.
In this decade seeing a GEN Z professional buy a house is a rarity. Not that it never happens. If your name is “Finneas” or “Billie” then you have pretty good odds. They’re musical geniuses, so they get a break.
We’re talking approx 1 in 50 for GEN Z (max age = 27) buying residences. Millennials (28-43) are slightly better off. Nothing compared to their parents. Housing prices skyrocketed over the last 20 years. More than doubled versus inflation.
Otherwise we’re seeing ramshackle-rural or 4-to-a-1-bedroom in NYC. Or a Mom’s-Basement Special going forward.
This is what it looks like when the Investment Sector declares a Class War — twice, for the Great Recession and then for COVID — and wins them both. And for every winner there is a matching loser: here combine GEN Z and Millennials.
Addendum: SCOTUS is set to vote a ban on any federal wealth tax. That’s what Democrats would have to use to get a Claw Back for money transferred with these quantitative easing schemes. I hope that no one here at DKos will be surprised when that goes through. Lovely.