Wednesday, August 3, 2011

It’s the PSST, Stupid! Apples and Houses

It’s the PSST, Stupid! Apples and Houses

It’s the PSST, Stupid!, by Don Boudreaux, on July 14, 2011 In Monetary Policy, Myths and Fallacies, State Of Macro, Stimulus, The Crisis, The Economy
"Without venturing here an opinion on the underlying source of each and every recession throughout American history, I will express an opinion about the current recession: it is clearly the result of distorting government policies, regulatory and monetary, leading up to 2008 as well as of the symptom-treating policies since then that only worsen matters. (And not to mention yet other actual and threatened policies – e.g., Obamacare - that distort microeconomic patterns of sustainable specialization and trade.)"
Bravo! I can quote someone else that writes with much more eloquence.

My version: The government is screwing it all up!

Second good idea from the article:

"As my great teacher, Leland Yeager, explained – for he is an able advocate of this “monetary disequilibrium” theory – because money “has no market of its own,” attempts by people to satisfy their demands to hold larger money balances have economy-wide repercussions in ways that people’s attempts to satisfy their demands to hold, say, larger inventories of apples do not."
So, as companies and individuals hoard cash, does the government (OK, Fannie, Freddie, and the other GSEs) holdings of Real Estate resemble "apples" ? I am less sure because of the metaphor: are apples consumables with limited shelf life? Would a home with 10 to 30 years of utility be the same comparison? 

I guess if the practice of "Banks bulldozing foreclosed homes" catches on... then the comparison works. Only the Government would consider destroying assets as a means to prosperity.


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