14th April 2011
Bad policy has real consequences
Bad policy, of the sort promoted by Keynesians including Alan Greenspan (whom we better know as a turncoat – a one time votary of free banking but who, on gaining the power over billions of people through his role as Chairman of the US Federal Reserve, lowered interest rates in USA to allow a splurge in bad borrowing to occur), has real consequences.
The consequences are now clear, as this article from The Economist illustrates. There is NO FREE LUNCH. All bad policy amounts to stealing money from someone and giving to another. That destroys the entire economic system.
Alan Greenspan can take credit for having chaired the collapse of America.
TO THE many dubious distinctions of Las Vegas, add one more: foreclosure capital of America. People who have managed to hold onto their homes are far from lucky: property prices are around 60% below the peak they reached in 2006, leaving 70% of homeowners in the area owing more on their mortgage than their property is worth. (Nationally, the proportion of homes that are “under water” is a still-awful 23%.)
All this makes Las Vegas the most extreme example of the many cities in America’s sunbelt that grew rapidly thanks to the cheap and abundant credit of recent decades, only to suffer fearsome property crashes during the subprime crisis and the ensuing recession.
The signs of the crash are everywhere in Las Vegas. The city’s outer suburbs are eerily quiet, thanks to the preponderance of unsold and foreclosed homes. There are few lights in any windows, and few cars on the roads. Banners and boards advertising hugely discounted housing flap and rattle mournfully in the desert wind. In North Las Vegas every second house on some streets carries a “For Rent” sign, offering rates of as little as $150 a month. One or two houses on each street have been boarded up and abandoned.
the value of homes near foreclosed properties falls faster than the market as a whole.
– dire effect on local governments, which tend to rely on property taxes for much of their revenue. Clark County, which includes Las Vegas, expects its take from property taxes will fall by over a fifth this year. The problem is all the more severe since demand for the services the county provides has risen amid the downturn. Local authorities also end up picking up the pieces when developers go bust or homes are abandoned, leaving fees unpaid, infrastructure to be completed and property to maintain.
All of this ripples through the local economy. The construction business, once a mainstay, has withered. Local governments are trimming their staff.
– high levels of foreclosure tended to drag down not just investment in property but also car sales.
– Moving house can cut people off from their friends, churches, schools and community groups.
– Many have lost their homes because they have lost their jobs. All this leaves them isolated and depressed. And that can lead to drug and alcohol abuse, domestic violence, juvenile delinquency and so on.
– A 2009 survey of Latino families around the country whose homes had been foreclosed had similar findings: amid the stress, marriages broke down; family members fell out; children’s academic performance suffered.
God bless America and its mad Keynesians. I can't see anyone out there who knows how to save America.
I'm sure those who have lost their jobs, houses, spouses, and are into drugs and alcohol are thanking Greenspan.