a. Yes inflation is not a concern for CB's, they've admitted this, and by this I mean hyper-inflation resultant from their actions. As for normal inflation, they want it badly. They would love nothing more than for the economy to get going, have another boom, maybe raise rates, somehow everyone can service debt, and we're back to normal ponzi mode.
They're not concerned with gov debt either (for now, and probably never actually). Their only concern is deflation and recession, and they're trying to print the economy out of it. When I talk of debt, I primarily mean private debt. Gov debt is an issue despite the MMT proponents saying otherwise, but that's another story.
The essential issue they are dealing with is low growth and high private debt. And now covid has made this conundrum worse. They can't raise rates, yet they don't want asset prices falling either, so we've got MMT style inflationary forces and devaluation of currency as core strategy.
- They will keep rates intentionally low for a long time, they've admitted this, and this is why economists say 'expect rates lower for longer', it's not only due market forces, it's CB strategy going forward. Thus debts can be serviced, and new borrowing encouraged.
- Concurrently they are conducting all manner of MMT, asset price support, and subsidies. They want to induce whatever inflation they can in the economy, except interest rates, they will peg those low. They want car insurance and celery to run hot. Thus the intent of inflation and severe currency devaluation. The point here is that normal market price discovery and normal pricing of risk is no longer happening. A mis-allocation of capital on a grand scale.
- What they are doing is clear evidence they want to print their way out of debt, japan style, soft landing style. 'Inflate it away' is probably a misnomer, they want to 'devalue it away'. Stagflation is likely with increased money supply and lower productivity.
b. I wouldn't chase property now, because despite CB strategy to avoid recession, recession remains a real risk. As for CB's buying junky MBS (they're doing it now), I mean prior to recession, to avoid one, not during. It supports the MBS price market, encourages bank lending, and indirectly props up property prices. They don't care about incurring more gov debt. If a decent recession occurs, I can't say what they would do. Their whole strategy is not applicable anymore in that case. For now, they don't want property prices falling, hence MBS purchases plus building grants.
2. Non bank lenders will have to navigate the contorted MMT economy like all of us. Like all business they flourish in a boom, and bust in a recession.
A 40% fall in metro areas is very severe. I am expecting recession especially if covid lockdowns continue. I can't say how much property would fall in certain areas. At least 10%, if and when, and easily more. I am also worried about geo politics and the world in general. I perceive the US is posturing for war, which is related to the current economic problems and trade wars. History will repeat.
