Wednesday, March 30, 2011

Government-Sponsored Ignorance

This is an absurd statement:
And as the housing market continues to be vulnerable, deep caution greets any proposal that might pass on higher borrowing costs to consumers. (WSJ – Fannie and Freddie)

God forbid that the costs be borne by the consumer! What economic idiocy. Of course the costs should be paid by the consumer. This is the fallacy of the free lunch that is perpetuated by government.

“We’re lowering borrowing costs!” venal politicians shout from the stump.

“No,” retorts anyone with a fundamental understanding of basic economics, “you’re just spreading the cost around.”

So the government forces apartment dwellers, renters, and those who own their homes outright to subsidize home buyers. This masks the true cost of buying a home and distorts the market, resulting in a bubble. Fannie and Freddie can keep lending standards low because these insurers know they will not bear the brunt in a collapse--Uncle Sam will.  Another market distortion.

We need just the opposite of what our politicians are peddling
Each consumer must bear the cost of what he or she consumes, and we must also be allowed to face the consequences, good or bad, of our decisions.  That goes for homebuyers, mortgage companies, and mortgage insurers. This will inject sanity into the marketplace.

Some cry that ordinary people will no longer be able to afford a home if the government shuts down Fannie and Freddie and stops picking everyone’s pockets for the benefit of the few.  I say balderdash! Private companies will step in and back those who can provide evidence of financial stability. Some people will no longer be able to buy a home, but those are the people who should not be buying anyway, as evidenced by events of the past five years.

And what place is it of government to say owning a home is more noble than renting?  


Lana said...

I've owned three homes in the Denver area and now own one in KS. I worked hard to pay the mortgages. My first home was financed by FHA...the others by conventional financing. I purchased the one in KS with cash. Today I wouldn't buy;I would rent. The upkeep, insurance and taxes would be someone else's responsibility. The American dream to own your home is something to strive for, however, no one should expect the tax payers to pick up the tab when you can't pay the bill.

You know, WH, the older I get, the less tolerant I become. It's time to get big government out of our lives.

Divine Theatre said...

PLUS!!!! We get to subsidize the wretched Section 8 baby mama down the street while her equally wretched fatherless children break into our homes and cars!

Lisa said...
This comment has been removed by the author.
Lisa said...

All we have to do is look at the Soviet Union when their government took control of everything.
The Government creates the problems and then they swoop in to fix it.
"Government is not a solution to our problem, government is the problem"

Anonymous said...

Well said, Silver. Having equal rights does not mean that everyones lives will be equal. This "wealth distribution" business is a lot of non-sense. It can only lead to everyone being equally poor. Not a good plan.

Jersey McJones said...

This correction of the housing market is going to take a long time to resolve. Unlike after prior housing crashes, people have less money to spend on housing than they've had in generations. The income to debt ratio is as bad as ever.

We have two painful choices, and neither has any positive guarantees.

We could try to assist the homeowners and potential buyers, at least make things a little easier on them - or - we can do nothing and let the market completely correct itself as much as possible.

I think, on a purely objective level, the former is better. This is not because I'm some biased liberal. After prior crashes, like in '87, I don't think we (We the People) should have gotten involved nearly a much as we did.

I think the former option is wise because the Baby Boomers are about to retire, and on their retirement hinges the future economy of the country. Their are 76 million of them, they control the vast majority of the wealth, and when they retire, they will begin to divest and that money becomes the wealth oif the next geenrations.

If Baby Boomers insecurely feel they do not want to retire, do not want to sell their homes in Northeast and Midwest, the market will stagnate. The entire generational exchange is painfully slowed.

As for what we can do? Well? How about a better HAMP??? Why get rid of it??? Make it better!!! Look back at the bankruptcy changes from a few years back!!! When that sleazy nonsense was passed I said to my wife, "Now watch, there go the mortgages." Hell, I'm tired of being right.

This isn't a "liberal" speaking. This isn't a "progressive." This is weighed, considerate opinion on a particluar matter.

Look, for example, I'm against corporate taxation of any kind at all! Why? Because it's nothing but a cannibalizing sales tax, and a drag on our international competitiveness.

See? I think for myself.


Divine Theatre said...

Jersey, you are a jackass.

Silverfiddle said...

It's a considered opinion you're expressing, Jersey, but I think we need to let the market settle where it needs to settle. Anything else is just reinflating the bubble.

No corporate tax? Wow! Even I wouldn't go that far, although I am for the current bipartisan plan they are talking about which eliminates loopholes in exchange for a lower rate.

Jersey McJones said...

Divine, I don't know why you said that.

Silver, of course you wouldn't go that far! The reason we have such a high corporate tax in America is because we have such a low top marginal tax on incime. You are a sycophant of the rich.


Most Rev. Gregori said...

I NEVER owned a home because I could never afford to and I wasn't about to have someone else pick up the tab for me.

When my sons were growing up, I rented a house, and now that they are all grown and married with families of their own, I rent a one bedroom apartment.

People used to tell me that the money I was spending to rent the house, I could buy a house for a lot less, but when I figured up the homeowners insurance, city, county and state taxes, along with sewer and clean water taxes, plus school taxes, repair costs, etc., along with the monthly mortgage payments, not to mention gas, electric and phone bills, I found that it was a lot cheaper to rent.

Silverfiddle said...

You're right, Reverend. Owning a home is not for everyone. It depends on the individual situation.

@Jersey: You are a sycophant of the rich.

OK. Now I'll join with Divine and call you a jackass. One unwarranted ad hominem deserves another!

MK said...

"Some cry that ordinary people will no longer be able to afford a home if the government shuts down Fannie and Freddie...."

Off course, because you know folks, back in 1922 and before that not a single human being in the entire world owned their home. As for those people outside America, well they rented from the lions and wild pigs.

I yearn for the day when governments will just eff off and leave us alone to live our lives, we did just fine before all these fascists came along and we'll do just fine if they all shot themselves in the head.

"You are a sycophant of the rich."

Really, i haven't seen any fawning words from Silver over obama, clinton, al gore, george soros or any other rich hollywood liberals.

You seem more the type to go weak at the knees when their names are mentioned. Unless off course you were merely projecting, again.

Silverfiddle said...

MK: Jersey thinks he's a contrarian. No matter what, he has to criticize us, even when we agree.

He does not realize that, as you point out, he is the sycophant to the liberal cognoscenti. Anything they say is accepted, and we libertarians and conservatives should just shut our mouths and obey our masters.

The projection is stunning, isn't it?

Always On Watch said...

The cost of owning a home goes well beyond a mortgage. I'm referring to the burden of maintenance, of course.

Sooner or later, a house needs work of one sort or another. If the buyers' mortgage is gobbling up too much of the owners' income, the house will look like hell and function poorly.

Believe me: renting does have its advantages.

The inflated price of housing a few years ago was a feel-good phenomenon, and people flipped houses and used their homes as ATMs. But such bubbles cannot last forever.