As I predicted Bernanke is more worried about the downturn in housing; than he is about the inflation situation...
That's the real reason for the recent "pause."
For the last few years real estate has been the default alternative investment to stocks... But that could be ending very soon.
It's not so much the declining house prices...AS THE DECLINING PRICE EXPECTATIONS in the housing market that could derail the economy.
Still the FED has only themselves to blame for allowing an inflationary mentality to set in for real estate. Indeed, real estate became the alternative to dotcom stocks for many people after the stock bubble crashed.
It is very likely that there is enough liquidity trapped on Wall Street to keep stocks and bonds well bid for the forseeable future... But the house market is something else...its more "real"...and every piece of property is by definition unique...unlike stocks which are generic and fungible.
So even as the markets rally about nothing...the FED obviously has got housing on it's mind...and in 2007 the consequences of the property bubble could hit the US economy like an Economic Tsunami...
