So, what would you advise policy makers to do?
"They should do nothing. They've done enough damage. Why don't they just let the market work? Why can't we just let housing prices go down? In California, housing prices got to like five or 10 times median household incomes—it was insane. Even though prices have dropped 20 percent, housing is still ridiculously priced. Prices need to come down. It's interesting: Initially, Fannie and Freddie's mission was to help houses be affordable. Now, their mission is to keep housing prices expensive. They are trying to prop up prices and not let them come down. That's the kind of stuff that the government did in the Great Depression. The government tried to stop food prices from coming down; they were destroying cattle and plowing under fields because they didn't want food prices to go down. In bad economic times, they were trying to maintain high food prices so that people who are unemployed have to spend more money to eat. So, now they are trying to maintain high home prices. It's stupid. Why not let home prices fall so that people can buy houses cheaper?"
Friday, January 23, 2009
Posted by Harriet at 8:27 PM