Thursday, December 20, 2007

Political Failure

Read what Treasury Secretary Henry Paulson said yesterday:

But Paulson said it was crucial to avoid a "market failure" in housing that could bring on "chaos."

"I want markets to work," he said in the interview. "I would define a market failure as the system not being able to cope in a way where foreclosures took place that would otherwise not have taken place if there was a smaller volume. So foreclosures take place that aren't in the investor's interest, aren't in the homeowner's interest, aren't in the community's interest, aren't in the greater economy's interest."

The result could be a plunge in home prices that would "force market values down in a which the market wasn't intended to work," Paulson said.

Listen up here now Hank,


A free market is merely the coincident of personal liberty; it exists so long as parties can freely exchange goods, services, and currency.

Any attempt to stabilize prices - as today's pols are intent upon - is a violation and repudiation of a free market. Hank is correct in a self-fulfilling sort of way. Yes, there'll always be *market failure* where there's government meddling.

Open any economics text book and you'll find plenty written on "market failure", "externalities", "social costs", etc.

Of course, there's far less instruction on GOVERNMENT FAILURE.

Here's another line from that article:

The administration's jawboning of lenders has angered some people who say foreclosures should be allowed to rise and put further downward pressure on home prices -- which in turn could make housing more affordable for renters who are waiting to buy.

In deference to full disclosure I want to add that I am one of those renters "waiting" on falling prices. BUT, I don't believe the government is currently or in the future capable of buffeting real estate prices. Home prices are slow to come down, IMO, because longer term Treasuries have been so strong.

Treasury bonds have been rising into the fierce winds of inflation and our fiscal deficits. From where I sit this makes no sense at all - then again, the price of Florida condos made no sense to me back in 2005 either.

1 comment:

Anonymous said...

You are a voice crying out in a wilderness of extensively informed ignorance. Never gas America's leaders been better informed or more inept. We are ruled by a cadre of sophmoric cads.

Thank you for contacting Rich. He jumpled on the problem and got it resolved. I was just able to post a short comment today on the greedy green-with-envy crowd of Al Gore et al.

Merry Christmas to you and your family, and may your New Year be filled with new joys and rising profits.

- Sir Padgett