Monday, January 26, 2009

Bad Bank + Bad Debt + Bad Bankers = Bad Idea

Once again I feel compelled to spread the "common sense" gospel as delivered by the honorable congressman from Texas, Ron Paul. This speech on the floor of the House of Representatives just 4 days ago mines down to the core problem with our new and current government's reaction to our economic condition. It really is not that complicated to analyze in my opinion.

The last paragraph of his speech sums up the issue in light of history...

The fallacy here is that we’re trying to keep prices high when prices should come down. What do we have against poor people? Lower the price of houses! Get them down, a $100,000 house get them down to $20,000, let the poor person buy these houses. That is what we want, but this is a remnant of the philosophy of the ’30s because it was thought we were in trouble because the farmers weren’t getting enough money for their crops. So people were starving in the streets, and guess what the policy was that came out of Washington? Pile under the crops, and maybe the prices would come up. Diminish the supply and it will solve our problems. It didn’t work then, it won’t work today...

1 comment:

Hank Robinson said...

Huh...interesting...but how?

Is he suggesting to let the entire housing market fail then houses will drop dramatically.

But what about the people that have a $150,000 loan on a house that is now hardly $100,000? Or the one with a $90,000 loan on the same house? Now it goes down to $20,000.

The problem is almost everybody has refinanced their home while rates were low. This is especially bad in Florida when appraisers were going crazy on prices. The longer this goes the worse it is. I talked to a school teacher yesterday that has an ARM that won't mature until late 2010. She is already looking for help.

I don't know what the answers are.

Should a person work to pay off their mortgage?

These are serious times. May the ingenuity of Americans get us out of this.