Since mid-2006, residential land prices in the United States have fallen by over 50 percent.2 Falling land prices were at the heart of the financial crisis from 2007 to 2009 and have generated a persistent fall in wealth and borrowing capacity for households. The associated declines in demand for consumption goods and investment goods pushed downward on prices and inflation.
1  The discussion in this paragraph is largely consistent with the following quote from Chairman Bernanke’s response to a reporter’s question in April about the Fed’s ability to lower the rate of unemployment more rapidly: “even purely from an employment perspective – that if inflation were to become unmoored, inflation expectations were to rise significantly, that the cost of that in terms of employment loss in the future, as we had to respond to that, would be quite significant.” (See transcript of Chairman Bernanke’s April 27, 2011, press conference, p. 14).