U.S. News – Peter Schiff: Let the Housing Market Crash:
US News: So, what would you advise policy makers to do?
Schiff: 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?
I agree. The government needs to quit trying to reinflate the bubble. The real estate bubble is gone just like the tech stock bubble is gone. People no longer want overpriced houses any more than they want Netscape stock at $150 a share.
We should have had some small recessions and price corrections over the last few years. The government and particularly the Federal Reserve didn’t want that to happen, so they did things like keeping the interest rate too low for too long, which enabled the real estate bubble. So now instead of a small correction we’re getting a big one. The government needs to let the economy fall to its level.
The economy will rise again on its own if the government gets out of the way. It always does.
Previously
- A word to the wise from Michael Shedlock
- Will lower interest rates help adjustable rate mortgage holders?
- This is where inflation fears are coming from
- The Fed, money supply, interest rates, and inflation
- Inflation-adjusted U.S. house prices 1975-2008
- How irrational were California real estate prices?
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