Based on a back of the envelope calculations I don't think the article's premise is plausible.
Just take the housing market, for example. Suppose people thought that housing prices would grow at the rate of inflation for the next 10 years... suddenly the prospect of whether to continue making payments on the next 10 years of a 30 year mortgage looks rather stupid. So these homeowners will be inclined to sell, driving prices down and leading to more sales, etc.
The above housing market deflation is precisely what the Fed wishes to avoid, so we can bet that monetary policy will be geared very specifically to prevent it, not just through interest rates, but through other actions that are done specifically to prop up housing prices.
In order to keep housing prices high, cheap credit will need to continue to be available to lower/middle income people...
We're already seeing the idea of "credit as a right" from policymakers... notably in the area of healthcare reform... even conservative economists have advocated things like a "healthcare credit card" issued by the government. Credit card companies are being treated more like providers of public utilities than as private businesses, etc.
All this suggests that credit will be more democratized (and politicized) than ever... it is, I think, the extension of traditional Keynesian economics to include the "time shifting" aspect of credit, but with all the same goals otherwise.
Just take the housing market, for example. Suppose people thought that housing prices would grow at the rate of inflation for the next 10 years... suddenly the prospect of whether to continue making payments on the next 10 years of a 30 year mortgage looks rather stupid. So these homeowners will be inclined to sell, driving prices down and leading to more sales, etc.
The above housing market deflation is precisely what the Fed wishes to avoid, so we can bet that monetary policy will be geared very specifically to prevent it, not just through interest rates, but through other actions that are done specifically to prop up housing prices.
In order to keep housing prices high, cheap credit will need to continue to be available to lower/middle income people...
We're already seeing the idea of "credit as a right" from policymakers... notably in the area of healthcare reform... even conservative economists have advocated things like a "healthcare credit card" issued by the government. Credit card companies are being treated more like providers of public utilities than as private businesses, etc.
All this suggests that credit will be more democratized (and politicized) than ever... it is, I think, the extension of traditional Keynesian economics to include the "time shifting" aspect of credit, but with all the same goals otherwise.