Foward into the Past - Friday, January 23, 2009
by: John Hamilton
We all know how we got into our current economic situation, don’t we? We spent like drunken sailors on shore leave, we borrowed like crazy, and acted like the bills would never come due. So what do the bozos in the Beltway have in mind to get us out of this fix? Why, spending more, borrowing more, and acting like the bills will never come due, natch!
Here’s the deal; the current recession stems from the popping of the real estate bubble, which came about because too much money was going too quickly into the housing market. But now the Obama administration and House Democrats are pushing to make sure that even more money goes into housing. Excuse me?
Yes, your eyeballs are functioning correctly -- you did read that correctly; these so-called learned politicians intend to raise the limit on loans that mortgage giants Fannie Mae and Freddie Mac can buy from $417,000 last year to $729,750 in some markets and probably even relaxing qualification requirements. And James Lockhart, who oversees the two companies as head of the Federal Housing Finance Agency, told The Wall Street Journal they should accept a lower rate of return than in the past in order to help Americans buy homes.
If you’re thinking to yourself, “Hey, wait a minute ... isn’t sending more money into the residential housing market the exact same thing that got us into this predicament to begin with?” you’re correct again. This added money will encourage more home building, worsen the current housing glut, push prices even lower and ultimately generate even more foreclosure which will, sing along with Uncle John now, deepen the recession.
Spending $825 billion on economic stimulus in this manner -- as President Obama proposes -- means more trouble, not less.
Comments: 1
When you think about it, you're absolutely right. This stimulus idea seems like a crock.
It makes no sense whatsoever to recreate the same circumstances which helped lead to this mess to begin with. It makes far more sense to let the market correct itself and to get back to something resembling normal. and that's something most politicians from either party don't seem to have a friggin' clue about these days.
Great post.
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