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3 housing charts show we’re heading for an echo bubble | Katonah Real Estate

Charles Hugh Smith’s Of Two Minds blog is required reading, and in his post Thursday he details how after six years of central planning by the Federal Reserve – and let’s be honest, that’s exactly what it’s been – the economy is more fragile than it was before.

There’s strong evidence he’s not exaggerating.

“The central bank/state intervene in the economy in a dominant fashion, controlling functions such as interest rates by order of central authorities that were once set by decentralized, self-organizing markets,” he writes. “The central bank/state pick winners and losers: for example, the Too Big To Fail Banks (TBTF) were selected to win, as the central bank/state bailed out their private losses with public-taxpayer money. In effect, the central bank/state enrich cronies at the expense of everyone else.

“The central bank/state manipulate the nominally ‘free’ market to boost asset valuations as a way of enriching cronies who own most of the financial assets and as a public-relations charade to mask the failure of their picking winners and losers,” Smith says.

“In other words, in centrally planned economies, markets are not allowed to discover price–they exist only to reflect positively on central planners,” he says.

One of the many current drags on housing has been the more than 30 years of stagnant income growth, especially for the middle class – the bulk of homebuyers.

Smith argues the Fed’s policies are what are causing that stagnation.

“How about real median income? Central planning has greatly boosted the wealth and income of the financier winners picked by the Planners, but sadly this does not include wage earners, who have seen their inflation-adjusted earnings plummet,” Smith writes