We’ve sure seen a lot of QE2 talk hashed around – including some hilarious cartoon spoof videos. But here’s a unique take from Andy Kessler on Bernanke’s real motivations for QE2, courtesy of the WSJ:
I have a different explanation for the Fed’s latest easing program: Without another $600 billion floating through the economy, Mr. Bernanke must believe that real estate (residential and commercial) would quickly drop, endangering banks.
The 2009 quantitative easing lowered mortgage rates and helped home prices rise for a while. But last month housing starts plunged almost 12%. And in September, according to Core-Logic, home prices dropped 2.8% from 2009. Commercial real estate values are driven by job-creation and vacancy rates, both of which are heading the wrong way.
Because of unexpectedly bad construction loans, the staid Wilmington Trust was sold to M&T Bank earlier this month in a rare “takeunder”—what Wall Street calls a deal done below a company’s stock value, in this case by 40%.