Tuesday, May 20, 2008

I Knew The NY Times Was Left Leaning ...

However I had no idea that they were in the business of promoting out and out socialism.

The Times rails against the President and Senate Banking Committee for not stepping forward and just throwing money at the problem. Ironically the Times is advocating using Federal money to support prices and insure mortgages. If that sounds like price control efforts that Richard Nixon advocated in during his tenure as President, your right. And coming from such a liberal media outlet, I am almost confused.

The Times cites the levels of decline over and over again in an attempt to inflame its readers and urge action to save a bunch of wildly irresponsible home owners and borrowers. The Times editorial even tries to apply the law of supply and demand, yet it ignores the basic premise of this most basic of economic theories. The editorialist believes that prices just fall and people start buying. However, this anonymous editorialist ignores the fact that real estate markets from coast to coast were dramatically over priced and over bought.

Historically, home prices double every 20 years. The nine years have seen home prices increase 85%. If this market were to reach some kind of equilibrium, prices would have to retreat a good 40% if its gains, before it could realistically start moving upwards again. The Times cites a 7.6% drop from February 2007 thought February 2008. That percentage drop represents a fraction of the correction needed to bring the market back to equilibrium so that the law of supply and demand could begin to work again.

When prices fall to levels which buyers think are reasonable, they will start buying again. Instead The Times home price levels like they are Constitutional Rights. The fact is, even in foreclosure, many homes are still priced above what is a reasonable valuation against historic real estate cycles.

In a final move of cowardice, The Times closed off its interface for readers to provide comments. The overwhelming sentiment of those comments was in deference to the anonymous editorialist. Quite frankly, I think it’s shameful for a public forum to provide an opinion on a given subject and then when it doesn't like the backlash it runs away and hides, but I guess you have to cut your losses sometimes when your DEAD WRONG!

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