Another Crazy Idea from the Establishment

In this article we can see how the Obama administration is contemplating renting out all of the houses owned by Freddie and Fannie instead of putting them up for sale, extensively with the goal that by renting them instead of selling them they will reduce the number of foreclosed houses on the market and thus presumably reduce downward pressures on housing.

This is another one of those typically stupid ideas concocted by an administration and the elites that has no understanding of economics or how to solve the situation. Again and again in politics and the mainstream media there seems to be this idea that if they can just raise the price of real estate, everything will be fine in the economy. What they don’t realize is that housing will only be expensive when people have the money to push up prices. The reason why housing is so depressed is because people don’t have the money to take on enormous mortgages. Before the bubble burst, banks were willing to hand out mega-mortgages to every unqualified individual who walked in the door and had a pulse. But, those days are over, and people who want to buy a house have to be more creditworthy than they had in the past. Since prices were jacked up so much based on bubble economics and unlimited debt, it’s normal that they would come down again to an affordable and reasonable level once the bubble burst. Besides, what’s so wonderful about super high housing prices that no one can afford? The media has continually propagated the idea that the higher that housing goes in prices the better the situation is. The government has made all kinds of efforts to try to stop the fall in housing prices, under the delusional thinking that if they can just do that, that the economy will be okay. Falling housing prices is a symptom of a bubble economy bursting, and a lack of money to sustain the bubble prices.

This new idea by the Obama administration to have the government start renting out houses is just crazy. Isn’t bad enough that we have the government up to its eyeballs insuring mortgages, and now we want to turn the federal government into this giant landlord. Just how far can Socialism go? The government is not in the business of renting out housing, and considering how incompetent the government usually is when it tries to run things, I can be pretty sure that they will make a mess of it.

What the Obama administration-and the rest of the status quo-don’t understand is that our economy will get better and start being more competitive only when we do some or all of the following:

-reduce costs

-increase productivity

-become more entrepreneurial and clever that exploiting opportunities

The reason that our economy is doing badly is because we are overtaxed, overregulated, overpaid, and not smart and productive enough and clever enough to beat the rest of the world.  In other words our costs of production are too high in relation to the quality of the products that we can offer. This is pretty much the problem with all economies that are floundering, and it’s not just exclusive to the United States right now.

Instead of dealing with these fundamental issues of competitiveness, politicians love to play games with printing money out of thin air, borrowing massive amounts of money to “stimulate” the economy, keeping interest rates well below the rate of inflation for years on end, manipulating the inflation figures to make it seem as if the situation is better than it actually is, and finally engaging in all forms of trickery to try to prevent a natural and healthy correction in the housing market from previous bubble level prices.  All of these forms of economic manipulation only make the economy worse. The only way they were going to get the economy going and healthy again is if we confront fundamentals of productivity and cost.

http://hosted.ap.org/dynamic/stories/U/US_GOVERNMENT_HOME_RENTALS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-08-10-13-18-31

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