If the Fed were to bailout subprime, they should demolish surplus homes inventory...

C

crgarcia

Following Keynesian "creative destruction", the Fed paid for the homes, they can do with them whatever they want.

While economically this makes sense, it would never be accepted psychologically and politically by the general public.

Some ideas?
 
Forget bailouts and monetary solutions... an unexplained arson epidemic on the outskirts of every midsize city in the US would solve everything. Instant housing shortage and plenty of jobs!

Just find a couple hundred pyromaniacs and give them a free pass. Let them do what they love!

Win win win
 
Quote from crgarcia:

Following Keynesian "creative destruction", the Fed paid for the homes, they can do with them whatever they want.

While economically this makes sense, it would never be accepted psychologically and politically by the general public.

Some ideas?
More...

You're a fucking idiot. Why the fuck should the Fed demolish homes or even intervine with sub prime. The reason why there are surplus homes is because they are overpriced. If they were priced right, this would not be an issue.
 
Quote from The Kin2:

You're a fucking idiot. Why the fuck should the Fed demolish homes or even intervine with sub prime. The reason why there are surplus homes is because they are overpriced. If they were priced right, this would not be an issue.
More...
Even if they were fairly priced, there IS a surplus of homes.

They built way too much homes in 2001-2002, way ahead of demand.
 
The fed gov shouldn't be involved period. Gonna make matters worse long term. Extend the pain, and raise rates on normal loans (investors are going to demand higher returns to buy bundled morts if they fear the Gov may interfere with returns).

Demolishing excess inventory makes more sense than capping rates. The federal gov is basically saying "fuck the free market".

Bad decision, just like the excess liquidity engine was. Feel the pain later when someone else will have to deal with it. And God forbid we have a recession, which is needed BTW.
 
Quote from crgarcia:

Following Keynesian "creative destruction", the Fed paid for the homes, they can do with them whatever they want.

While economically this makes sense, it would never be accepted psychologically and politically by the general public.

Some ideas?
More...
Look up the broken window fallacy. Destroying assets will not make the economy better: http://en.wikipedia.org/wiki/Parable_of_the_broken_window

And BTW, something similar to this was tried. During the Depression, agriculture prices went down "too far" and the farmers started complaining. So the federal government, thank you FDR, bought the surplus crops from them and burned them. When the public, many of them unemployed and hungry, heard about this, it was not too popular. So the government switched from buying surplus crops and burning them to paying farmers not to produce at all. In fact, the federal government still pays many farmers to sit on the asses and do nothing.
 
Quote from The Kin2:

You're a fucking idiot. Why the fuck should the Fed demolish homes or even intervine with sub prime. The reason why there are surplus homes is because they are overpriced. If they were priced right, this would not be an issue.
More...

I think he was being sarcastic, ie saying the same thing you are; ie since their logic is flawed to begin with, why not keep it going?
 
What does "creative destruction" have to do with the fed and Keyenes??

Joseph Schumpeter coined the term as he layed out the role of the entrepreneur.
 
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