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Why the obsession with supporting asset values

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Unformatted text preview: very real risk, and Fed Chairman Bernanke seems to be willing to do whatever it takes to avoid a deflationary spiral. Furthermore, real estate values are the key asset securing bank loans. Should real estate values continue to decline, then bank capital is at risk. Additionally, declining real estate values inhibit the mobility of the labor force. However, it is difficult to target only one asset with monetary policy. Consequently, it can be argued that the continued on page 56 55 2012 Colorado Business Economic Outlook Financial Activities continued from page 55 unintended consequence of the nontraditional easy monetary policy is to inflate all asset values. This calls into question what the real value of the stock market and commodity prices would be, in addition to treasury securities and real estate, if it were not for these nontraditional actions. However, residential home prices continue to decline. From a regulatory stand point, the Federal Housing Finance Agency announced a series of changes to the Home A...
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This note was uploaded on 02/11/2013 for the course MGMT 231 taught by Professor Yu during the Spring '13 term at Bauder.

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