by the Fed also effectively increased the money supply and drive down interest rates. This keeps borrowing costs cheap for those who need it. In theory, the Fed can just keep buying assets, such as US Treasury and mortgage-backed securities (2020, Schrotenboer). The cause of the current crisis is a pandemic that forced businesses to shut down for weeks, leading both the Fed and Congress to take extraordinary measures. Congress is approving huge amounts of spending on stimulus and relief while the Fed is creating huge amounts of dollars that end up paying for that debt. The Fed’s mandate from Congress is to maximize employment and stabilize prices. U.S. Treasury can print money out of thin air because no other country can borrow quite like the United States, whose Treasury securities are in demand worldwide since they are backed by the “full faith and credit” of the U.S. government, a global superpower with a powerful military. In the first quarter of 2021, 15% of U.S. homes sold were purchased by corporate investors — not families looking to achieve their American dream. While they’re competing with middle-class Americans for the homes, the average American has virtually no chance of winning a home over an investment firm, which may pay 20% to 50% over asking price, in cash, sometimes scooping up entire neighborhoods at once so they can turn them into rentals. Historically, when the housing bubble bursts because home prices became overpriced, the crash of the stock market follows afterwards. Federal Reserve can effectively step on the gas during times like this and hits the brakes when the economy appears to be overheated and prices rise too fast.
clvii
Powered by FlippingBook