The prescience of Hazlitt

thedo — Sat, 07 Feb 2009 23:31:00 GMT

Shortly after the erection of Fannie Mae, and nearly 30 years before that of Freddie Mac and the legislation of the Community Reinvestment Act, Henry Hazlitt was there. The voice of the Austrian school could see it with his refined eye, as only he could. 'It,' of course, is the unseen consequences of government action.

From the Fiftieth Anniversary edition of Economics in One Lesson, p. 33-4:

"The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to "buy" houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment."

When Words Disappear

thedo — Mon, 08 Sep 2008 22:49:00 GMT

It's always interesting to watch how a society's vernacular changes, to see new words added and old words subtracted. Additions bring the most fuss (see: text messaging). Subtractions often slip by the way side. The most striking example, today, is the word 'SOCIALISM'. As in, while the government bails out and consumes Fannie Mae and Freddie Mac, who oversee over 70% of the housing market, few in the mainstream refer to this act as socialism, which it nearly well is.

The questions posed by commentators concern how much taxpayers will pay and what the future looks like for the housing market. Never is the question 'Is the United States moving toward socialism?' which is a serious question.

The economic hilarity of the situation is striking and shows a clear economic ignorance. If the government is bailing out the housing market (i.e., paying for their debts), how will the average tax paying American not pay for part of the bill? The government's coffer is staffed only by what it takes in from taxes. That is, you pay what the government pays.

Disappearing words are like those neighbors who move out in the night. They slip away unnoticed until one day an event happens that prompts someone to ask, 'Whatever happened to such-and-such?' When the U.S. government assumes over 70% of a market and achieves the biggest government intervention in too many years to recount is such an event.

Apropos Austrian Aphorisms : freddie mac

The prescience of Hazlitt

When Words Disappear