Game Changer: Housing Market Forces Feds to Reassess

The Housing Market is pulling the economy down. Clearly the recent unveiling of the foreclosure debacle is a game changer in the Fed’s strategy to bring the economy back around. Any plan set for the last quarter of this year is null and void. The cost of unraveling the legal web is likely in the billions when it is all said and done. Ben Bernanke is no doubt under intense pressure to take action toward healing the economy. Although he has been suspiciously silent in the days leading up to the Foreclosure Freeze outbreak, he was quoted in the Wall Street Journal as saying he will take the measures necessary.

What about the rumors and speculation about Quantitative Easing? This is a monetary policy strategy that infuses money into the economy by purchasing securities. If the Federal Reserve buys bonds, banks will then have money from the sale of the bonds, which can then increase their ability/desire to lend to businesses and individuals. The domino effect will serve to speed up the economy. Unfortunately last year’s attempts to speed up the economy had little impact, so specialists are debating about whether or not quantitative easing will be enough at this point.

Nevertheless, the stock market is dancing to its own beat, seemingly not connected to the sluggish economy. In the meantime a lot will hinge on the two-day meeting held next week, , beginning November 3rd. Investors are not expecting the quantitative easing measures to have the traction needed to spur the economy. It will undoubtedly take more than throwing money at the problem, which is why next weeks Fed meeting is highly anticipated.

(See Interesting Article about the Currency War at Reuters)

K. Reilly
The Cohn-Reilly Report

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