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@newtonquach asked How did the Federal Reserve and the Treasury affect the housing bubble?
The federal reserve and the treasury both play bizarre roles in the housing bubble. One of their main roles was to completely remove all meaning from the United States dollar. When the loans for housing began to fall apart, the federal reserve decided to fix it by simply printing more money to pay it all off. In doing so, the United States dollar began to lose value. While this was going on, the treasury was intentionally fixing the interest rates and artificially lowering them, despite the fact that the forces of supply and demand would have naturally raised the interest rates as the value of the dollar dropped. This artificial lowering of the interest rates caused people to assume that there was more stability and security than there actually was, which caused people to live and spend as they would if there were that level of security. This resulted in people buying more than they could realistically afford and taking out loans for houses that were poorly backed, and unlikely to be repaid. This was exacerbated by the attempts of the government as a whole to increase the sales of housing, despite doing so beyond what would be sustainable. The rising purchases of houses and loans to buy houses that were both backed by no capital was the core of the housing bubble. Eventually, since the economic system was entirely unbacked and not guaranteed, when people tried to start calling in these debts, everything collapsed. This caused the financial crash of 2008, and caused everyone to realize that there had, in fact, been a housing bubble. Now, the same thing is happening again, as loans and other similar services are being governmentally bailed out with money that was specifically printed for that purpose, resulting an even bigger bubble. However, even though the bubble is so big, the governments of the world seem to have generally acknowledged that debt no longer matters and is only going to increase. As a result, I predict that this time, the massive debts will either not be called in, or it will end in war.
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