Saturday, June 18, 2011

Silicon Valley at the Epicenter of Ben Bernanke Money Printing

The epicenter of the current round of Federal Reserve money printing is clearly Silicon Valley. One piece of evidence is in the housing market.

The median sale price of single-family houses in Palo Alto, home of Facebook, climbed 20 percent in May from a year earlier to $1.63 million, the biggest jump since 2008, according to preliminary figures from DataQuick. In Mountain View, the base for Google and LinkedIn Corp., prices rose 3.1 percent to $957,500.

Austrian economics teaches that when a central bank prints money, it doesn't find its way into everyone's pocket at the same time. It usually hits the capital goods sector (as opposed to the consumer sector) first. It is IPOs and venture capital funding this time around, which is what Silicon Valley is all about.
If money printing continues at a strong pace, it will spread to other parts of the economy, but it looks like in this go round, Ben Bernanke funny money is hitting Silicon Valley first.

1 comment:

  1. I'd differ with you in calling this a Silicon Valley phenomenon; I think it's more a Mountain View/Palo Alto phenomenon. With the money flooding into IPOs and startups these days, that's translating into a jump in sales of high-end homes. Outside of the high end, though, the market is still absolutely ugly in Santa Clara County.