

Should we let housing prices fall?   - jakewalker
http://www.marginalrevolution.com/marginalrevolution/2010/09/should-we-let-housing-prices-fall.html

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lzw
It is kinda amazing to me that this is up for debate. I think the reason is
that so much policy presumes that government can just make a choice and pick
whichever is best for the economy.

Notice in this article, and almost every other article, no mention is made of
what will happen if government steps in.

Government stepping in _always_ does damage to the economy because every
action government takes has some cost, and that money comes out of the
economy.

Worse the money government spends comes out of the profits of companies and
indivdiuals, or via inflation which increases costs and reduces these very
same profits.

So the money comes from the most critical point in the job creation process-
right when consumers would be deciding to buy more with extra money, or
businesses would be hiring people and expanding.

Meanwhile, the use of that money is less efficient. Propping up housing prices
isn't really going to fool everyone, it will just delay that point in time
where people believe the errors of the past (government errors, FWIW) have
been worked out and they start to trust the economy again.

People seem to treat "government" as a magical money tree whose decisions have
no consequences. This is not the case. All government actions do damage to the
economy, and thus government should be limited to only those essential
functions.

Trying to manage the economy is not one of those essential functions, because
government can never be good at it (because government priorities are always
going to be for a short term rosy economy for elections, not for a long term
growing healthy economy.)

