More price distortion

THE FED HAS AN ALARMING LOW-INFLATION PROBLEM

But...

For 62 straight months, Southern California home prices have gone in one direction. Up.Five years ago, you could snatch up a median-priced condo in Orange and Los Angeles counties for about $280,000, 76 percent less than today’s prices. A median-priced house cost $323,000 in L.A. County five years ago and $495,000 in O.C., about $260,000 less than today’s prices in both counties.

So, most consumables are likely deflating at the moment, and the Q3 implicit price deflator will drop to near zero.  Cause?  Goldman Sachs is forcing down the ten year yields so Congress can pay the interest charges.  

But the ten year is the benchmark for housing.  If you own a home in California at the moment, you are doing very well in capital appreciation.   And that looks to continue and is attracting the Asian rebalance as more Asians take advantage of home investment.

We will get the sudden stop.  Goldman Sachs cannot continue playing the game.