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ehanneken's Archive on Oct 07, 2008
Description
Arnold Kling's fantasy testimony to Congress on the causes of the mortgage and financial crises, and what is necessary to end them.
Clipping
Given the unoccupied housing glut, attempts by policymakers to try to boost house prices are likely to prove futile. As long as the housing market remains out of balance, the valuation of mortgage securities will be problematic. As difficult and painful it may seem in the short run, it probably would be better to work through the foreclosure process and let prices adjust to levels that bring supply and demand into balance in the housing market than to prolong the state of imbalance and uncertainty by trying to prevent foreclosures.
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Eldritch_Crank