Federal Reserve Expects High Unemployment Indefinitely

This is bad news for housing values. If people don’t have jobs, they can’t afford to pay for mortgages. This reduces demand for homes, which drives down prices, drives down housing values, ending people HELOC (home equity lines of credit), leading to more foreclosures, lower home prices, more foreclosures, defaults…

The Washington Post reports:

“While there is considerable uncertainty about the outlook, the balance of evidence suggests that the recovery is gaining momentum. In these circumstances, I believe the process of returning policy to a more balanced weighing of short-run and longer-run economic and financial goals should occur sooner rather than later,” Hoenig said.

“We cannot afford to be short-sighted,” he said.

The Fed cut its benchmark federal funds rate to near zero in December 2008 and created a host of emergency lending facilities and bought mortgage-related to fight the worst recession in more than 70 years. It has pledged low rates for an extended period.

“If we leave it (the fed funds rate) there too long, then we will invite a new set of instabilities or inflation,” Hoenig said in response to an audience question.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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