Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The High Cost of Washington's Housing Market Price Manipulation Policy

Housing-Market / US Housing Dec 09, 2008 - 09:36 AM GMT

By: Ayn_Rand

Housing-Market

Best Financial Markets Analysis ArticleWant to eliminate the glut of homes? Don't give the government more power--open the borders to immigration.

For decades Washington has been manipulating prices to encourage homeownership and "steer" the economy. To "incentivize" you to buy a house, it made mortgage payments tax deductible, largely exempted homes from capital gains taxes, and created Fannie Mae and Freddie Mac. After the stock market tumbled in 2001 and 2002, Washington established a policy of artificially low interest rates that created the illusion of cheap credit; leery of the stock market, and looking for someplace else to put all this easy money, Americans began buying homes in droves.


But eventually the drug-induced high of artificial credit wore off, and out-of-whack housing prices plummeted, sparking the financial crisis. What was Washington's response? It ramped up its price manipulation policy, injecting us with a new round of "easy money" amphetamine: Bush doled out "stimulus" checks, the Treasury began funneling billions into banks, and the Fed started frantically slashing interest rates. And, we are told, this is only the beginning. A new dose of bailouts, interest rate cuts, and "stimulus" giveaways is just around the corner.

Maybe it's time for a new approach. How about we start thinking of ways to address this crisis by getting the government out of the business of price manipulation--and let prices, from home values to interest rates, be determined by people’s free choices and the law of supply and demand?

This will require some unconventional thinking--and here's a suggestion to get us started: free up the housing market by freeing up immigration. That's bound to be controversial, but indulge us for a moment.

Right now the housing market is in disarray. Too many homes built for our current population has sent prices spiraling downward, and millions of homeowners, stuck with mortgages they can't afford and houses they can't unload, are facing foreclosure. Meanwhile, there are millions of peaceful people around the globe eager to bring their wealth, talent, and ambition to this country, but can't because Washington forcibly prevents them from immigrating.

This government-enforced cap on the number of potential home-buyers is just another instance of price manipulation. Imagine if the number of annual immigrants increased from around 650,000 a year to, say, five million. Virtually overnight we would see money pour into the American real estate market, as millions of new businessmen and workers bought and rented homes. Not only would this eliminate the oversupply of houses, we would enjoy the broader economic benefits of welcoming legions of highly skilled and motivated individuals into the American economy.

You might be thinking, "Won't this lead to lower wages or unemployment at a time when we can least afford it?" The history of this country attests to the fact that, in the long run, immigration fosters economic growth. Even in the short run, however, the effect on wages and employment is an open question--it depends on how much capital and entrepreneurial acumen the new immigrants bring and create.

There are many other simple measures we could take to roll back the government's manipulation of prices. For instance, we could eliminate restrictions on bank ownership, which coercively limit how much capital banks can raise.

Besides such quick, immediate steps to end government price distortions, we need a long-term strategy to eliminate all government policies that manipulate prices. We need to eliminate the countless regulatory shackles on financial institutions, which distort market forces and encourage reckless actions. We need to put an end to the government’s crusade to encourage homeownership through Fannie and Freddie, the Community Reinvestment Act, tax code manipulation, and many other avenues. Above all, we need to end the government's ability to set interest rates and create inflationary booms--and their inevitable busts--by phasing out the Federal Reserve and allowing the United States to return to a gold standard.

These would be radical reforms, to be sure--but that's because the government has been radically expanding its price manipulation policies for the better part of a century. We're seeing where that path leads. It's time to start moving in a new direction.

By Yaron Brook and Don Watkins

www.aynrand.org

Yaron Brook is the president of the Ayn Rand Center for Individual Rights. Don Watkins is a writer at the Ayn Rand Center. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”

Copyright © 2008 Ayn Rand® Center for Individual Rights. All rights reserved.

Ayn Rand Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

rohit
10 Dec 08, 20:40
Green Card Processing Inefficient

Sir,

Good idea but what you are missing is the fact that legal immigration and the system is completely broken, USCIS (the agency that gives Green Cards is highly inefficient, their efficiency is worse that a govt agency in a third world country). I am a highly skilled legal immigrant. I came to the USA in 1998 and my green card is pending since the last 7 years and I am not alone. There are thousands like me who want to buy a house but are waiting for the GC to arrive. there is a huge backlog of people who don't get GC because of unavailable visas because USCIS wastes thousands of immigrant visas every year.

Thanks


Post Comment

Only logged in users are allowed to post comments. Register/ Log in