In response to
A Global Recession?

COS911 in Colorado
Monday, June 18, 2012 at 6:08 PM

" Household wealth is way underwater from the housing collapse, dropping nearly 40 percent in the last three measured years." The problem was that most of that 40 percent decline really wasn't there. Most of the household wealth increase during that period was due to the housing bubble, and didn't indicate a sustainable wealth increase (unless you were lucky enough to get out of the market before the bubble collapsed), The housing bubble was caused by government intervention, and distortion of the housing market, and by regulation of banks with regard to their lending practices that distorted the mortgage market as well. People may feel like they lost a lot of wealth tied up in their house, and many who entered the market near the peak lost real wealth (or will if they sell), but a large number lost paper wealth they never realized (unless they took out inadvisable second mortgages based on the increased paper value of their house, and spent the money). All this goes to show the unintended effects of government intervention, even for what sounds like the admirable purpose of increasing home ownership. The market works when allowed to and those that, through their own analysis of their own circumstances will buy a house if they can demonstrate to someone else they are worthy of a loan, or if they have the cash available. The government doesn't need to be, nor should they be, involved in this transaction.