He did offer one suggestion: "The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants," he said. The only sustainable way to increase demand for vacant houses is to spur the formation of new households.
Think about it. Shifting the demographics of a country, screwing with the labor supply, and for what...? To prop up housing prices.
Jesus, idiocy.
It has been observed that there are two types of inflation. "Good" inflation, and bad inflation. When the price of gasoline, eggs, or candy bars goes up, it's bad. When the price of stocks [1], houses, or labor goes up, it's good.
In fact, it depends entirely on whether you are an asset holder or prospective asset holder. Many people hold houses, while few hold warehoused candy bars. Hence, the confusion. Corporations are managed by people who 1) Hold candy bars (viz, goods), 2) Hold houses, and 3) Do not hold labor. Thus, they will do what they can to inflate the price of particular goods, property, and deflate the price of labor. The value systems of the different classes are opposite in this respect.
In fact, I think it would be great if housing prices dropped 90 percent. Guess whether I own a house or not.
[1] Only Warren Buffett groks this. He once claimed that he wish all of his stock dropped in price by 50 percent (iirc)
He's not 'manipulating' the market. He's trying to end the manipulation. The global supply/demand imbalance in real estate is lower than the local demand, and so by allowing people from overseas to come to the US, he's rectifying that.
It's not like he's advocating the kind of immigration we usually get (uncontrolled, unskilled, non-English speaking, general more statist/leftist people from Mexico).
And I don't think one should define good or bad inflation i terms of one's personal portfolio. The only relevant question is whether prices send accurate signals: if we have increasing oil prices because the cost of extracting oil has risen, that's good inflation no matter who benefits from high oil prices.
I mean "good" as in "what someone desires", not whether it adequately fits some model. The reason is: If someone defines a particular price increase as "good", that person will try to manipulate the underlying model. Thus, the government wanted housing inflation, and so it artificially lowered interest rates [1]. They still want it...and so they can still get it by artificially introducing more buyers into the market.
I'm through with Alan Greenspan. It may indeed be a good idea to increase skilled immigration; for all I know, it might even be a good idea to increase it specifically to support home prices.
But I just can't stomach hearing this from the guy who probably did more than anyone else to inflate the housing bubble. This housing crisis wasn't some obscure, unexpected blow from an economic blind spot that surprised economists and policy makers alike. Greenspan didn't just ignore the concerns of a bunch of fringe doomsayers - he ignored obvious and well documented warning signs.
Housing prices jumped, so Greenspan lowered interest rates. They jumped more, so Greenspan lowered the rates even more. They jumped again, and Greenspan lowered them to 40 year lows and started touting the benefits of exotic mortgages that could get them even lower.
Now he suggests that we pursue a high population immigration strategy so that we can fill up those houses at their peak valuations? Good one.
The funny thing is, I'm not really opposed to skilled immigration (provided it is done with freedom and is broad based, not through corporate indentured servitude targeting a small sector of the labor pool). But we need to hear it from someone other than Greenspan. He needs to hang out by the pool and play golf now, I'm not interested in hearing from him. Like Marcellus Wallace said to Butch: "you get gone, and when you gone, you stay gone, or you be gone. You lost all your LA privileges."
"Whether or not you believe X, the idea that we would change our stance on the matter because of new circumstances that make it a better idea is absurd."
Whether or not you believe in burning criminals at the stake, the idea that we would change our stance on the matter because it's cold outside today is absurd.
(The point being that X in this case is an important issue of policy and Y is a transient, small-beer problem that X wouldn't really solve much anyway.)
Most people consider the real-estate bubble to be a massive shock to the financial system that could quite easily lead to a severe recession and the government takeover of $1 trillion in Fannie & Freddie debt (plus another few hundred billion for FDIC). You won't hear anyone in the know describe this as a "small beer problem".
Think about it. Shifting the demographics of a country, screwing with the labor supply, and for what...? To prop up housing prices.
Jesus, idiocy.
It has been observed that there are two types of inflation. "Good" inflation, and bad inflation. When the price of gasoline, eggs, or candy bars goes up, it's bad. When the price of stocks [1], houses, or labor goes up, it's good.
In fact, it depends entirely on whether you are an asset holder or prospective asset holder. Many people hold houses, while few hold warehoused candy bars. Hence, the confusion. Corporations are managed by people who 1) Hold candy bars (viz, goods), 2) Hold houses, and 3) Do not hold labor. Thus, they will do what they can to inflate the price of particular goods, property, and deflate the price of labor. The value systems of the different classes are opposite in this respect.
In fact, I think it would be great if housing prices dropped 90 percent. Guess whether I own a house or not.
[1] Only Warren Buffett groks this. He once claimed that he wish all of his stock dropped in price by 50 percent (iirc)