Thursday, March 26, 2009

Mr. Hazlitt....He right

Wow. Was Henry Hazlitt blessed with the gift of foresight? Nope. Just economic logic. This from 1946 (from KPC friend and ubermensch Mark Perry)

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 they long run they do not increase overall national production but encourage malinvestment. (my emphasis)

~From Chapter VI "Credit Diverts Production" in Henry Hazlitt's "Economics in One Lesson," first published in 1946

(That would be 1946. 63 years ago. Not bad. Now go out and vote for those CDBG Down Payment Assistance Programs, you do gooders! You are harming the very people you seem to believe you are helping!)