Common Sense from Peter Schiff

The more I read, the more I like this guy. Here’s Peter Schiff in US News talking about how dumb it is for the government to be trying to create the illusion of value in the real estate market:

“They are trying to maintain high home prices by keeping interest rates low. That’s how they want to create more affordable housing. What’s a much more efficient way [to create more affordable housing] is to let home prices fall so that houses become more affordable because they are cheaper. And so people don’t have to borrow as much money to buy a house. These low interest rates are only temporary. They can’t stay down here.”

And this:

“It’s interesting: Initially, Fannie and Freddie’s mission was to help houses be affordable. Now, their mission is to keep housing prices expensive. They are trying to prop up prices and not let them come down. That’s the kind of stuff that the government did in the Great Depression. The government tried to stop food prices from coming down; they were destroying cattle and plowing under fields because they didn’t want food prices to go down. In bad economic times, they were trying to maintain high food prices so that people who are unemployed have to spend more money to eat. So, now they are trying to maintain high home prices. It’s stupid. Why not let home prices fall so that people can buy houses cheaper?”

And finally:

“…the government is trying to artificially prop up houses because as housing prices fall it exposes the extent of the damage in all these lending institutions that hold all these mortgages. And they are trying to maintain the illusion of home equity to the American public so they will spend more and save less, which ultimately undermines our economy.

(emphasis is mine)

I just don’t get how anyone with a working brain can think it’s a good idea for the government to pump money into banks to prop up a system that clearly doesn’t work. Let it break, then fix it. All they’re doing is putting hundreds of billions of dollars of band-aids on it.

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2 Responses to Common Sense from Peter Schiff

  1. Phil R January 25, 2009 at 4:19 am #

    Ditto on the car industry.

  2. David Mihm January 25, 2009 at 9:37 am #

    Amen, Brother McGee!!

    I think the problem is that the government does not want a whole bunch of people on the street who would get kicked out of their houses, so they’re trying to cushion the blow.

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