Friday, 20 November 2015 13:19

The Housing Adjustment -- Editorial

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The Housing Adjustment -- Editorial

Angus MacDonald

The stimulus package being offered by the federal government to almost everyone was initiated because would-be owners of homes have not been able to pay their mortgages. Financial institutions in the U.S. have lost about $170 billion as of February 2008. These losses create a negative market for genuine business credit.

Alan Greenspan has written that the present financial crisis is the gravest since the end of World War II and will end only when home prices stabilize. Builders and investors have built about 800,000 vacant, single-family homes, waiting to be sold. Hundreds of thousands have moved into rental housing.

To ease the crisis our politicians from both parties, including President Bush and House Speaker Nancy Pelosi, created a stimulus package, and are ecstatic about the good that will be done. Individuals will get $600 and couples $1,200. There will be $300 for each child. Those who earn up to $75,000 a year, or $150,000 as a couple, will be eligible for the payments. Nancy Pelosi says that about 116 million American families will get rebates.

I doubt if the money being sent will be used to pay mortgages. A one-time check of $1,200 is not much in relation to the cost of a home. A lot of people would prefer a trip to Florida in the winter. Our family paid for our home years ago and does not need another $1,200 for that purpose. One thing is sure. We shall not spend it. My ambition for the rest of my life is to spend nothing. If we find a sound vehicle for savings that would increase the ability of an entrepreneur to get some needed capital that would be a good use of the money.

The effect of the stimulus package will do little if anything for the mortgage crisis and will, instead, create inflation. Cheapening the value of the dollar, we are in effect being taxed further while we are told we are getting a gift. Politicians are not consciously dishonest but are carried away by dreams of euphoria so they lose common sense. We want the nicest help we can have, and the banks want us to have this niceness, but when the roof collapses the banks and citizens are in deep trouble. At the moment, the roof has collapsed in the housing market and will not be corrected until houses lose value to where they can be bought and sold.

Many individuals and many investors and many banks will lose money and perhaps become bankrupts. There is no way around it. Giving a stimulus to those who are irresponsible is to be irresponsible.

We are a democracy, but when popularity becomes the law of the land democracy cannot stand. Simple honesty and individual responsibility are the only foundation that will give a lasting basis, individually and collectively. On the other hand, I am not convinced that the average citizen lacks intelligence and character. If he is given the facts by honest and informed politicians and journalists he will choose with wisdom. Our young men don't hesitate to give their lives for their country in a time of war and they will do the same if the need is to get us on a sensible financial basis. It is not necessary that they give their lives but it is necessary that they preserve common sense and live within their income. We must not ask politicians to bail us out. We have to recover from our errors.

Some years ago, when I lived in Toledo, I visited with a friend as we looked at splendid homes in that city. My friend remarked that a lot of owners of these splendid homes could not afford them.

The inability of borrowers to pay their mortgages has to be the responsibility of lending institutions. That is obvious. Why have they been so foolish? And for many years? Mathematically, a new house does not have to be built until births are greater than deaths. If we have one house for every couple, we have enough. Some houses in Europe, and even in the United States, are centuries old and have housed many generations of a single family.

Houses are built beyond need because some people like to avoid extremes of climate, as summer vacation resorts, because they have the money, and houses have been a sound investment for a long time. Investment companies have agreed with the sentiments of would-be buyers and have extended credits to those with insufficient income or credit history. Mistakes have been made by dreams of euphoria.

A home is a sanctuary where a family gathers to live properly, with love and respect for each other, looking to the future when each member will look back and know that is where he learned to be a good person. We do not need more homes but more sanctuaries. Technically, we do not need more homes than we have of increased births. Homes may be old and delightful. That is how it is in old societies. A home is more than an investment that will increase in value.

We should only buy what we can afford and what we need, and we must listen to salesmen with caution. Salesmen are interested in their incomes, not ours. One called me today, insisting that I buy some stock costing $40. He ignored my refusal and forced me to hang up. Rudeness is bad but being forced to be rude is also rude. *

"Nothing happens without a reason, but all things occur for a reason, and of necessity." --Leucippus, of Miletus, 435 B.C.

Some of the quotes following each article have been gathered by The Federalist Patriot at: http://FederalistPatriot.US/services.asp.

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