Chez Chesler

I fear government ownership of the means of production more than I fear a depression. Here I am worried that gas or heating oil might go up another fifty cents, while overnight the federal government has spent several times my annual petroleum budget to buy worthless paper. Somebody said "If you owe the bank $100,000 they own you; if you owe them $100,000,000 you own them." NOTHING is too big to fail. What good did we get out of the 9/11 settlement fund (whose purpose wasn't justice, or compensation, but to keep the airlines from going under)? From the Bear Stearns buyout? If houses are foreclosed, for a while the neighborhood might be more blighted -- occupied homes, and especially owner-occupied homes, have positive externalities -- but eventually someone will buy the house at a lower price: Affordable housing.

Labels: economics

Jordan's Furniture ran a promotion this past spring: If the Red Sox won the World Series, the entire purchase price of your furniture would be returned.  So that he could cheer for the home team, Eliot purchased an insurance policy.  (Soon after Warren Buffett bought the company, Barry stopped doing the commercials.)  Newsradio was interviewing folks and they kept saying "It's win-win, the Red Sox are happy, the fans are happy, the customers got free furniture, and Jordan's was insured."  Never mind the Indians and the Rockies, somebody has to pay for all this, namely the insurance company.  To be fair, the Boston Globe story cited does note this.

On the other hand, home prices are falling.  The bubble has burst, and prices, which aren't supposed to drop because "they aren't making any more" land, are down to a level not seen for, oh, two or three years.  This is supposed to be a tragedy, but people aren't buying houses for fuel.  One family moves out, another family moves in.  There are still millions of people (30% of the country, half of New Yorkers) who don't own the house they live in.  For every home-seller who loses a dollar because his house isn't worth as much as he hopes, there is a home-buyer who gains a dollar because he didn't have to spend as much as he might have - and there are some people who can afford houses who wouldn't be able to otherwise.

Labels: economics, housing, prices, zero-sum