Odograph.com

I listened to “left right and center” on NPR last night. They talked about the Presidential candidates’ plans for the credit crisis. That crisis continues to unfold of course, probably in ways most voters and listeners are not aware of. It has become broadly a credit crisis and is not at all isolated in homes or sub-prime mortgages.

And that’s really the rub. Candidates speak to “homes” and “mortgages” in very superficial ways. When they propose fixes for that narrow end of the problem they risk being counterproductive in the broader economy.

The “left” guy said that houses in Santa Monica were “selling for half their value.” Hello, buddy? Maybe that wasn’t their value after all? I’m sure the same guy would favor programs for affordable housing and rent control. He was a parody, of the classic left attempt to twist (enforce) the market to be all things at once.

The “right” guy tried to say as little as possible. That’s probably because he liked the status quo. He did parse out McCain’s statement to include (as McCain said) interventions to support financial infrastructure, but he (the commentator, not McCain) did add “and housing markets.” I think that was probably a dishonest sop to home owners. I don’t think the commentator (or McCain) would intervene to support housing markets.

The sad middle ground, not spoken, is that the financial infrastructure does need to be supported, but we also must let asset bubbles subside. That home in Santa Monica (and my own) must find their current, natural, value. And if support for infrastructure means guarantees for a broader set of institutions, then those institutions must carry a greater burden of oversight.

Oversight and support must go together.

And the government certainly cannot bid up everyone’s homes in value, while at the same time creating affordable housing.

I worry that our debt loving and home buying society might take the wrong moral path, and just attempt to bail itself out. Matthew Kahn has a good response to that:

Don’t Forget the Renters Ben!

I don’t know Ben Bernanke but he doesn’t seem to care much for guys like me. I’m a renter and taxpayer. I would like to see him and Rick Miskin explain in a press conference why home owners need to bailed out and protected from the loans whose terms they chose to accept. I would like to know how many of my tax dollars will go to this bailout of the Bear Stearns. If they like activism, they should go back to their home universities and attend a university wide faculty meeting. What’s the matter with the world that Robert Schiller has predicted? Why can’t prices fall? [...]

A quick note, that standard 25# bag of flour I talked about before hit $14.99 a couple weeks ago. That means prices have tripled in the last year.