The Driver behind the Real Estate Bubble
Let us understand how QE (Quantitative Easing) has become a dominant factor in the real estate bubble from 2007 to 2014. What is QE? QE is basically printing of money by the US Central Bank (called Federal Reserve Bank) to pump more money into the US banking system so as to prop up the US economy from the downfall of the 2007 Financial crisis. How does QE work? The US fed prints money ($4.5Trillion ~ 1/4th the size of US GDP) and lends it to US banks. You may also think of this as the Fed making a term deposit with the commercial banks just like you and me - except that we earn our money and deposit our savings in the bank while the Fed simply prints the money and deposits it with the US banks. The banks were then supposed to lend the money to businesses for expanding their operations and providing employment to people in the US. Instead, the banks used the free money (because interest is almost ZERO) in speculative activities in markets around the world. (Why did the Fed n