Posted by Kerry Ranson
When the Treasury Department announced recently its intent to pour $500 billion into the financial community by way of bond purchases, the pundits weighed on both sides of the equation. While the goal of the investment is to loosen the credit environment for investors, many worried that the influx of these dollars would lead to a depression of the dollar.
I am certainly no fan of inflation. A depressed dollar makes traveling more of a challenge domestically, though it makes inbound travel much more enticing.
The truth is, however, that we don’t know for certain that a devaluation of the dollar will be the result. What we do know, unquestioningly, is that the credit stranglehold is the most serious barrier to an economic recovery for our industry.
As I see it, this government investment could achieve some very important goals:
- Keep interest rates low, which can also spur investment into the industry;
- Restore a credit environment that has been nearly non-existent, giving the transaction market a much-needed boost;
- Open the door for greater competition and, consequently, improved values because transactions will likely no longer be dominated by cash-position REITs.
Do we risk a devalued dollar? Yes. Is it worth that risk? In my opinion, that is an unqualified yes.
What do you think? Is loosening credit worth the risk of a depressed dollar?