The risk of a recession period in the U.S. and the possible role of home equity

De Koning, Kees (2022): The risk of a recession period in the U.S. and the possible role of home equity.

Abstract

The Bank of International Settlement in its latest report demonstrates how the inflation levels, especially of food and energy prices have affected the behaviour of households in the U.S and in other countries. This paper aims to set out a method to use home equity as a policy tool for the Federal Reserve.Home owners equity now far outstrips U.S. annual GDP level. During the Great Recession, households had no other option than to use private sector financing. In the paper it is demonstrated that such use was detrimental to household's interests. To avoid another Great Recession, the Fed might wish to take over this responsibility.

• Item Type: MPRA Paper
• Language: English
• Keywords: Home equity in the U.S. Accumulated values over the last 24 years. Quantitative Easing Home Equity (QEHE)
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

References

References:

. 1 Bank for International Settlements; Basel; Bis Annual Economic Report 2022; https://www.bis.org/publ/arpdf/ar2022e.htm

. 2 Households’ owners’ equity in real estate; https://fred.stlouisfed.org/series/OEHRENWBSHNO

. 3 U.S. government debt levels as a percentage of GDP https://fred.stlouisfed.org/series/GFDEGDQ188S

. 4 U.S. Households pension savings https://www.federalreserve.gov/releases/z1/20200611/html/l117.htm

. 5 The causes of the Great Recession by Institute for Relations on Labor and Employment at Berkely University; https://irle.berkeley.edu/what-really-caused-the-great-recession/

. 6 U.S. Households mortgage level outstanding https://www.federalreserve.gov/data/mortoutstand/current.htm