Wednesday, February 11, 2009

Dead economist predicted housing crisis 62 years ago

Written in 1946 by economist Henry Hazzlitt in his book,"Economics in One Lesson," this analysis simply could NOT be a better prediction of the housing bubble.

Link HT: Big Rattler
"Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in they long run they do not increase overall national production but encourage malinvestment."