Oh well, another month of 10 percent inflation in the Consumer Price Index. And here's the point. The Fed hasn't started raising interest rates yet. Not until next week. And that means...
We've had a nice liberal guest around here, who keeps mentioning the availability of "affordable housing.," meaning, of course, government financed and assigned housing for approved poor people.
I just haven't had the heart to mention that the reason housing is so expensive -- and that housing prices here in Seattle are going through the roof -- is government.
Back in the day, before the Great Depression, all you could get was a 50 percent mortgage. And you had to refinance it after ten years. Do you see how that might keep house prices down? Because, you see, before you can borrow any money you have to pony up 50 percent of the home's value. In cash, in savings.
The federal government has been subsidizing mortgages since the invention of Fannie Mae in 1938. That set up government-backed 30-year fixed mortgages for homes. But, of course, no private lender can offer 30-year fixed rate loans. Not at 3 percent. Not with 2 percent inflation -- in a good year. So the gubmint does it. In the years since the total of such government-backed mortgages have gone to about 40 percent of GDP. So that's really an additional 40 percent on top of the existing federal government debt of over 100 percent of GDP.
By the way, why in the world does anyone buy 30-year bonds from the US government, knowing that it can inflate the value away any time it likes?
On top of that, government encourages low-down-payment loans, sometimes pretty close to 100 percent of the home's value. Which isn't too smart around 2006 at the peak of the last real-estate bubble. And, of course, the more that people can bid for a house with borrowed money the higher the prices go.
On top of that, ever since the 70s, because feminism, mortgage sellers have to count both man and wife income in evaluating creditworthiness. Since a lot of people believe in borrowing the full amount that the lender will allow, that means that more people are competing for more homes with more borrowed money in their pockets. And that means higher prices, and that means less affordable housing.
Because you see, a healthy credit system relies on two things: faithful payment of loan payments by the borrower; and proper collaterization of loans, so that if the borrower defaults the lender can get his money back. If either or both go south -- as they did in the 2008 credit crisis -- then you got trouble, right here in River City.
That's not the whole of it, of course. There are building codes, which make houses more expensive. There are environmental regulations, that limit the land available for housing. Oh no, we can build any more houses because there might be a landslide. Oh no, we can't build any more houses because there might not be enough water.
All of these wise and educated policies subsidizing mortgages means that more people compete for loans, and the more people that compete, the higher go the prices.
And then nice liberal ladies think the answer is government "affordable housing."
And that's just houses. Then there is everything else that's going up in price because the government is printing money and is stopping the fossil-fuel industry in its tracks and is still not backing modular nuclear plants, and and and.
And the tragedy is that it is all going to cause untold suffering to ordinary people and especially to poor people in the lower classes.
Because the more you muck around with the economy, with wars and lockdowns, and money printing and Fannies and Freddies and subsidies and handouts and regulations and programs, the more you jerk the ordinary person around. And end up Making Things Worse.
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