Thursday, October 18, 2012
New Housing Starts Up 12% Last Month Thanks To Fed Policy
The WSJ reports that housing starts hit a four year high last month. Many attribute the increase the quantitative easing done by the Fed. The Fed has put $3T of mortgage backed securities (MBS) on its balance sheet. A Bank of America spokesperson expects that the Fed will purchase an additional $2T MBS for its balance sheet over the next two years. With the absence of fiscal policy in the US, the Fed has used monetary policy to spur the recent recovery in jobs. It would be better if fiscal policy and monetary were better coordinated but electoral politics have made that impossible. The Fed, left to its own devices, has selected the proper tool for stimulating growth. Housing has been the problem for the decline and the Fed may turn it into the path for recovery.