Helen & Harry Highwater's cranky weblog of news and opinion.
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"News that's not known, or not known enough." Helen & Harry Highwater's cranky weblog of news and opinion. |
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Tear down the houses! by SirJ Everyone has their pet solution to the financial crisis. I will offer up mine and hope I get some feedback. It is very simple and very radical. The problem is not the mortgages. The problem is
If there were fewer houses, each house would command a higher price in the marketplace. Higher market prices would make it less attractive for an absentee owner to default on his mortgage. Fewer houses would make it more difficult for a resident home owner to find a new place to live, thus encouraging him to stay in his current home and pay down the mortgage. Fewer houses leads to fewer defaulted mortgages which solves the lousy mortgage problem at its cause. I do not mean buy up the mortgages, which is what Pauson's Proposal. Let the banks foreclose on the properties nobody wants, let the banks wipe those mortgages off their books and suffer the loss. Buy the foreclosed properties and tear those down. It goes against every instinct in our being to waste these resources by disposing of them. Yet it is precisely the solution anyone takes who has too much of something: he gets rid of it. Fewer houses on the market would force building to pick up to replace the missing houses. Paying to tear down the houses would create jobs. The entire business cycle would revert back to normal. Everyone I've read agrees business will not pick up until the inventory of houses on the market works itself down. The obvious solution to excess inventory is to throw it out. We can either wait
Some are warning of a coming depression. World War II is frequently credited with bringing about the end of the Great Depression. War destroyed vast amounts of industrial capacity, housing, eliminated the useful infrastructure as well as useless. Declare war on residential housing, not a concept war as in war on poverty. Make it a physical war, with real but selective damage done to the infrastructure. It's depression or war. Choose your poison. One enhancement to the plan would be to make it possible for people to continue to live in a house even if they are currently in default on their mortgage. They should be allowed to start over with an affordable mortgage, and be penalized by forfeiting all equity in their home. For those who invested in a house which they do not live in and are in default on that mortgage, there need be no sympathy. Those properties can be repossessed. I would penalize them even further: have them forfeit equity in the house they do occupy. Entire neighborhoods have been built which are virtually vacant. A prime example of this would be the overconstruction in the suburbs of Las Vegas. I see no point in trying to maintain neighborhoods which no-one wants. If the house is unoccupied at the time of default, it should be torn down. It appears the ridiculous bailout plan will pass the House, because enough goodies have been loaded on to persuade specific Congressman to vote for the bill, and because few will want to be perceived as doing nothing about the economy. I differ with those who believe the bailout is a conscious plan to save the fat cats on Wall Street. Paulson's background was working for a firm which sold credit. It is his area of expertise. He is experientially unable to create any solution to the end of ten years of a credit bonanza by anything other than freeing up more credit. There is no evidence he sought the advice of any economists. SirJ PERMANENT LINK
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