Malkiel

The Fed’s Dilemma: Rescue the Housing Market or Feed the Poor?

I'm dubious about your proposition that inflation is going to beget wage increases that will help the mortgage problem. Wages go up very slowly, but mortgage holders get stopped out of the game quickly once their ARM's reset. There just isn't enough time for wage increases or real estate price increases to save these people--in the real estate bust of the early 90's buyers were mostly out of the market for a long 3-year stretch, and foreclosures from that era were still happening toward the end of the decade.

Because it seems none of the measures designed to help mortgage holders are working, it would be better for the FED to concentrate on the currency and inflation. The one thing that will help the mortgage market is restoring confidence among lenders, a process requiring different tools than interest rates...