Mortgages--Phooey!

I am tired of reading about Central Banks this morning, and decided to turn to this Post by JP. The Central Banks are still pouring Money into the Markets, trying to forestall a rupture of the Mortgage Underwriting system. This Post shows that year-over-year increase of the Producer Price Index was up 2.4%. The Fed will be less likely to cut its rates, of course, but what is wrong with this Picture. The Fed is pumping in Money to prop up the Mortgage structure; this can only mean that the most Resource-intensive Construction practice will continue unchecked, so what is there in the high Rates which impedes the economy as much as underwriting One-Third of past Housing construction?

Economics has a theory called Creative Destruction. Fed monetary policy has the practice of setting high Rates, an element designed in purpose as a form of creative destruction. The idea is that Operating Capital becomes more expensive when the Interest rates go up, so Opportunity Costs are higher for Business development, while high Rates slow Consumer Purchase through Debt aggregation. Now We find the Fed buying Mortgage-backed Securities to float the Mortgage Market which had overextended Credit. Is it only Me, or do Others perceive the Conflict of Policies here?

Consumers had financed much of their Consumption through expansion of their Mortgage liabilities under Conditions of rising Prices for Housing. The drop in Home Pricing brought on the Mortgage Crisis in the first place. The Fed dumps Money in the Market to cover the Mortgage Crisis, with the implied Promise that they would absorb any Losses coming from the bad Credit extension. Is there anything in this Policy which inhibits Consumers from financing their Consumption through Mortgage expansion? Is there any admonishment to Mortgage Lenders to restrict the practices which caused the Mortgage Crisis in the first place? Is there any vicious impediment to Contractors, to enjoin curtailment of their Construction Schedules?

The PPI will not reduce significantly without contraction of Industry Construction Schedules, no matter where the Interest rates are set. Mortgage Lenders will not cut the size of their fees, without Shortage of liquidity or lack of Mortgage potential; as constant Intake is their personal Income. Investment Depositors are going to underwrite these Mortgages, as long as the Fed will guarantee Coverage of any losses. Greenspan previously mentioned the Fed was losing control of Monetary policy because of these Mortgage-backed Securities and other later-Day financial instruments. I don’t think he even came close to the actual magnitude of the Problem. lgl