This is what I wrote one year ago about Q.E. 3.
739. The third housing bubble (10/1/2012)
This was what happened in 1990s. The Feds started to buy in the real estate property from 1990 when they drove down the housing price. In 1997, when they found I trying to buy a house, the Feds passed the “Taxpayer Relief Act” to check other buyers from competition. Then they pushed up the housing market with the “dot com” babble. Why? Because the area where I live is the Silicone Valley where the high tech. companies gather in and where the Feds hold a lot of property they bought in my case. The tactic was to encourage the establishment of new company. The high salary employee would boost the property price.
The “dot com” bubble exploded in 2000. The Feds might have made good profit in property market in elsewhere but the San Francisco Bay Area where they invested heavily in my case. How to release their wealth? Then came the second bubble.
In April 2001, Pentagon created EP-3 spy plane collision incident in South China Sea. In secret deal with China to release the spy plane crew, the Feds bribed China to frame a drug case in US. As a payback to Pentagon, the Feds helped Pentagon prepared 911 terror case. Silverstein leased WTC at that month. 911 also gave the Feds the Patriot Act they have longed for. (See: “695. The collusion of D.O.D. and D.O.J. (11/28/2011)”)
With Patriot Act and a framed drug case in hand, the Feds now was sure Kat Sung would be eliminated. What needed was a booming housing market. How to get it? By manipulate the Federal Reserve.
http://graphics8.nytimes.com/images/2008/12/16/business/17fed.graph.190.gif
You can see how dramatically the interest rate dropped to the bottom in 2001 that created a housing babble US ever had which finally caused financial collapsing in 2008.
However, the property the Feds hold in Kat Sung’s case is still there, how to deliver the hot potato into other people’s hands? It’s still the mission of Federal Reserve.
Reuters – Wed, Sep 26, 2012.. .
(Reuters) - The U.S. Federal Reserve launched a new round of monetary stimulus this month, saying it will buy $40 billion in housing-backed bonds each month until the labor market improves substantially.
The Fed has kept interest rates near zero since December 2008 and now says it expects weak economic conditions will warrant keeping them there through at least mid 2015, half a year longer than it had earlier expected.
http://news.yahoo.com/factbox-fed-officials-comments-economy-policy-200444357--business.html
When Federal Reserve exhausted their interest rate tool, to help the Feds to break away from their straits, Federal Reserve will turn papers into money by printing 40 billion dollars each month – all of them will poured into the real estate market in order to create a third housing babble. This time, the bubble will come with severe inflation, I foresee.