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Fed's $1 trillion injection has its risks
Heading up the steps of the U.S. Treasury Department
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Steve Chiotakis: The Fed's move is having an immediate impact in the mortgage market.
From North Carolina Public Radio, here's Marketplace's Janet Babin.
Janet Babin: If you're looking to refinance your mortgage and you've got good credit, Google "refinance." You'll see some eye-poppingly low rates. Quicken Loan's site is promising 4.5 percent. Other sites are offering rates near record lows, too.
Dean Barber with Barber Financial Group says the Fed's decision to buy up government bonds and mortgage-backed securities could help turn the housing market around.
Dean Barber: The hope, in my opinion, that could come from this is that people can refinance their loans and we can slow the rate of foreclosures.
Barber fears, though, that lower rates won't help enough homeowners. He's also worried about the value of the dollar. It fell against most currencies yesterday in reaction to the Fed's buying frenzy.
Edward Hadas is with BreakingViews.com. He explains that this cash infusion could have a good effect for awhile, but:
Edward Hadas: Too much cash for too long will unleash a lot of inflation.
For the moment, the Fed is willing to take that gamble, with unemployment rising and consumer confidence low.
I'm Janet Babin for Marketplace.
The biggest risk that we have to this injection is “double troubleâ€, not only will we be hammered by inflation but it will also make the American Dollar weaker against the other currencies. In a country that depends on much of its staples like food (from Mexico) and clothing (from China) we have double inflation. Stuff becomes expensive and the other countries want more $ for give us the stuff. The Chinese can peg their currency to the Dollar. That means we don’t really know how poor we are getting until it is really too late.
I agree with Bob. Until someone/household with a median income can buy a median priced home prices will have to drop. People have to be able to afford the home. Keeping home prices up helps no one in the long term. Everyone needs to be thinking long term not for todays feel good story.
Once again, another attempt to somehow "save housing". Nobody seems to get the bigger picture which is simply put, home prices were too high, are still in most prime areas still too high, and must and will come down regardless what the FED or government does. Re-inflating prices is not the ideal solution lest we land right back where we were. I would much rather see money being used in more constructive ways rather than trying to boost a broken system based on rampant consumerism and the hyper-inflation of personal assets.
