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Two Extremes
The debate over what government should do about the slumping real estate market seems to be governed by the people at both extremes.
Those on one end say that this is a country based on capitalism and you should never intervene in free markets. They believe that any attempt to help the real estate market will only set it up for a further crash down the road. Eventually, they believe that the market must find its own natural bottom. Anything the government does interferes with that and only delays the inevitable pain.
The other end of the spectrum believes that the government must pull out all stops and do anything we can think of to improve the real estate market. After all, it's at the root of our current economic downturn. And, since we've never seen this exact set of circumstances before and don't know exactly what will work, let's try 15 things and see what sticks. In this scenario there's help for troubled homeowners, homebuilders, new home buyers and probably every one of us, eventually.
As with most debates dominated by extremes, I suspect the truth is somewhere in between there.
Yes, it's a capitalist country we live in. But recent events have surely shown us that capitalism with no controls is a precarious way to live. And if you pump enough stimulus into any market you risk things like inflation, asset bubbles, etc. We've been there and that's not a pretty picture either.
I'm going to suggest that there are things that can be done that won't blow up the whole economy again somewhere down the road. It's surely possible to help more troubled homeowners than we are now without risking another real estate bubble. Yes, some of the people we help may still end up losing their homes down the road. But perhaps by then the market will be less flooded with foreclosures and better able to absorb those.
I'm also going to suggest that giving a dime to prop up failing companies is a bad use of taxpayer money. That goes for auto companies or home builders. Help the people affected by their failure. Government can surely help to cushion the blow. But let's not throw any more money down a bottomless pit.
Extremes are dangerous in most arguments. But right now, extremists risk causing further damage to an economy that's already reeling. Let's try a more reasoned approach!
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