Some food for thought that Thomas' Sowell's new book The Housing Crisis points out:
1.) Affordable housing initiatives. Sowell points out that housing does not directly correlate to social outcomes. Indeed, when people moved out of slums into new housing projects in the 60's, they turned those slums into cesspools of crime.
2.) The idea that minorities need special affordability measures: Sowell points out a Fed study that actually shows that 2/3's or all African Americans who apply for gov't backed mortgages actually receive them while 3/4 of white do (10% difference), and
that some of the discrepancy is b/c African Americans carry more debt relative to income and that housing cost is a greater share of their income.
3.) The book makes light of the fact that the bubble was largest, and thus caused the most retraction in prices, in communities with strict zoning regulations and other "open space" laws to restrict building. cont>
2.) The idea that minorities need special affordability measures: Sowell points out a Fed study that actually shows that 2/3's or all African Americans who apply for gov't backed mortgages actually receive them while 3/4 of white do (10% difference), and
that some of the discrepancy is b/c African Americans carry more debt relative to income and that housing cost is a greater share of their income.
3.) The book makes light of the fact that the bubble was largest, and thus caused the most retraction in prices, in communities with strict zoning regulations and other "open space" laws to restrict building. cont>
The last point is important and gets overlooked. The focus on federal measures has overlooked the fact that neighborhoods in which there was the most local gov't regulation suffered the worst in the housing crisis.
2nd important cause:
Bubbles could not occur in this magnitude w/o Greenspans inflationary monetary policy, the stated goal of which was to create debt for the Chinese to buy so that they do not overheat their own economy. We are too dependent on them, a Chinese bust would create a global depression
Evidence: Southeast Asian economic crisis which just involved 5 Asian Tigers, but took them 10 years to recover from. Too much of the worlds manufacturing output comes from Asia to risk their collapse; it's a catch 22, inflation here or deflation there
Bubbles could not occur in this magnitude w/o Greenspans inflationary monetary policy, the stated goal of which was to create debt for the Chinese to buy so that they do not overheat their own economy. We are too dependent on them, a Chinese bust would create a global depression
Evidence: Southeast Asian economic crisis which just involved 5 Asian Tigers, but took them 10 years to recover from. Too much of the worlds manufacturing output comes from Asia to risk their collapse; it's a catch 22, inflation here or deflation there
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