House bubbles

“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 over-expansion.  IN brief in the long run they do not increase overall national production but encourage malinvestment.”

Henry Hazlitt, “Economics in one lesson”

Advertisements
This entry was posted in economy, government, interventionism and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s