Further to this, I would also like to add that I do fully believe in free market capitalism.
Well, you'd support higher unemployment and overall lower standard of living then. Sure, housing prices would be a lot lower too but you'd still wouldn't be able to afford them. My God, why would you ever think that if the housing prices were lower then suddenly you'd be able to afford it ? Doesn't the market reflect the price of equilibrium ? Higher rates, higher mortage payments, higher unemployment, lower wages, and suddenly you feel richer ? You got something upside down, dude.
Moreover, since the rich have tons of money, then raising the value of money (by raising rates) would only make them exponentially richer because now they can park their excess cash into high interest bonds AND buy up all the cheap real estate leaving the middle class fully empty handed forever.
So this would mean that interest rates were allowed to be set by the market.
Interest rates ARE set by the market. If they weren't then why would any central bank (mostly in emerging markets now) accept 5-10% interest rates ?? it's all about the government bond market. Stop buying those bonds and you'll see the CB hike like there's no tomorrow. The fact that it LOOKS as if the CB is in control means that there's still lots of real money demand for those bonds. Why ? i dont know.
Your desire for higher interest would only make the sidelines cash that the rich have earn an interest without ever lifting a finger. How is that gonna help anybody ? If you were a CBer, would you really give the rich 5% risk free return if you could give them 1% or 0% as it is now ?
Just these two simple steps would have meant that people were actually buying houses to live in.
The only steps i see for the future is taxes directed at speculation, taxes directed at those who have fck ton of money but are not paying anything. We'll see if it's ever gonna happen tho. Why would you raise rates for everyone ?? Wasn't your idea that the working class could afford more ?
