Posted by
Andrews on Friday, August 22, 2008 1:40:42 PM
It is interesting how, once the government gets involved, we end up with counterintuitive results. When something is a private matter, without any coercion involved, it doesn't matter. If I think something is a crisis or not only matters to me. But once the state gets involved, and it has to adopt one position for every individual in the economy, we end up with bizarre, counterintuitive, often contradictory, results.
For example, if there is a good, which almost everyone buys, which is necessary for survival, and the price suddenly rises, is it a crisis or a benefits/ Likewise, if, following that rise, it suddenly drops, is that a benefit or crisis?
Well, if ti is gasoline, the rise is a crisis, if it is housing, the fall is. Or so have the Solons in congress decreed.
The truth is, it is neither. If you are buying a house, rising prices are a bad thing and falling prices good. If you are selling, the reverse. And if you are doing both, it really doesn't matter, you only care about the spread in prices between what is bought and sold. To call either high or low prices a crisis for everyone (and then attempt to "solve" the "problem") is just absurd*.
Of course, as the government artificially deflated interest rates and promoted absurdities such as interest only loans, the government's policies encouraged a number of people to get into adjustable rate loans that did not touch principal, meaning that when prices fell and rates rose, they found themsleves unable to refinance into a fixed rate and their payments skyrocketed. So, in deference to this constituency, the government decreed it a crisis. But the point is, it is a crisis for these people, but for first time home buyers, it is a boon.
But that is the problem with government meddling where it shouldn't. One rule never fits all, nor is it better when the government creates multiple solutions for multiple groups. The truth is, the individual himself know his needs best, and should make such choices. Once the state becomes involved, it ends up calling something a crisis which benefits one person.
Just to give one more example, like most Americans I own some oil company stock*, in my case Exxon Mobil stock. (I bought it yesterday, so don't blame it for my earlier essays on oil.) So, if Obama and congress follow through on their plans to "help" Americans with a "windfall profit" tax, they will help me out of about 50% of the money I invested. Once again, their "solution" for everyone is really only a solution for a subset of the people.
And that is the problem of government, you always substitute the judgment of a committee for your own, and no committee will ever know you
as well as you do. Of course, there are a few areas where we need government. But even then, I would argue we should
keep the power as close to the individual as possible, which is why I support
federalist solutions, where
power is concetrated at the state or even local level, making sure it is as responsive as possible, and can be tailored to the wishes of the local population. But, outside of those few areas where government is essential, why would you argue that it is better for someone else to decide for you?
It simply makes no sense.
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* They may not know they own oil stock, but it is not an unusual holding for a mutual fund, especially given the relatively sound profits of several recent quarters. The whole sector still doesn't have great performance when viewing profit to equity ratios, but it is solid enough that many mutual funds seem to have some money in oil.
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POSTSCRIPT
This use of a myopic perspective to declare something a crisis is a topic
I have covered before, but in terms of housing it is particularly amusing, as the press has declared both conditions a crisis.
When houses were expensive, they decried the fact that young couples could not afford homes of their own, and they were not going to have the standard of living their parents enjoyed. Now that prices have come down, they are decrying the loss of equity and foreclosures.
The truth we should take home form all this is: Changes hurts some people and helps others. That's it. Nothing more. Change effects different people differently. But, since without change we stagnate and die, we just have to suck it up and deal with it. Unless we are in the press or politics, when we can decry the harm done by change and use it to sell advertising or buy votes.