Here is a letter I fired to the Wall Street Journal:
December 17, 2008
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
R. Glenn Hubbard and Christopher J. Mayer look with alarm at the decline in housing prices (“Low-Interest Mortgages Are the Answer,” December 17).
Two thoughts: First, why is it acceptable for housing prices to go up, but not down? If Hubbard and Mayer want increased homeownership, they should cheer for lower prices. The law of demand states that when something is cheap, people buy more of it.
Second, artificially tinkering with mortgage interest rates will not change the underlying realities of supply and demand. Existing Hubbard-Mayer-style interventions such as Fannie Mae already induce consumers to take on loans they can’t afford. Too much borrowing is one cause of the current economic slowdown. The solution is not to borrow even more.
If this is the state of expert opinion, then experts should be kept as far away from policy makers as possible.
Competitive Enterprise Institute