Alan Greespan continues to claim that the economy won't revive until housing prices stop falling.
Imagine, if you will, that the date is February, 1637; we're in Holland, and the commodities market has completely collapsed. Greenspan, Obama, and the Democratic Party step in with a massive stimulus package, new rules and regulations, increased taxes, and endless exhortations focused on one task only: to re-inflate the prices of tulip bulbs to their previous high levels. Government officials assure the public that spending, the markets, and companies will slide into deeper and deeper trouble until tulip bulbs recover.
I'm afraid I don't understand why a housing-price bubble is more important than a tulip bulb-price bubble. The housing bubble was the inevitable result of easy money — low interest rates and a deliberate government policy, on the part of Fannie Mae and Freddie Mac, to make loans available to people who did not meet standard risk criteria. To claim that the bubble must be re-inflated is simply another way to claim that prior government policies did not contribute to the crash.
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