US Economic Policy has always been to artificially increase prices in an attempt to avoid dealing with the consequences of economic recessions. Both the US Government and the quasi-private Federal Reserve have done so with their anti-free market interventionist policies. For many decades now the economic growth of the US has been dependent on Government deficit spending to finance the costly Big Government policies that subsidize economic activity. Doing so we have avoided many significant economic contractions at the cost of record deficit spending and the loss of a fundamentally sound economy. In order to fight contractions in the housing market both the Federal Government and the Federal Reserve System implement many policies that protect the housing and financial markets from natural economic contractions.
Demand and Supply of Real Estate
Any natural reduction in demand for real estate is quickly fought with the expansion of anti-free market policies that create artificial demand for housing while restricting the supply. In addition to artificial low interest rates, the systematic expansion of government loan guarantees increases the demand for real estate while policies that led to an unofficial foreclosure moratorium restrict supply. The interventionist policies affecting the real estate markets result in artificially high prices that are very disconnected from economic fundamentals. It doesn’t make financial sense to buy overpriced residential real estate just as it is impractical for businesses to incur the elevated cost of doing business in the United States with expensive American labor.
Real Estate Correction Will Help Create Productive Manufacturing Jobs
The American unemployment rate is greater than it has been for many decades. American Companies have outsourced many productive jobs to foreign Nations where commercial real estate and labor are more affordable. These jobs will never return to the United States unless this Nation is willing to provide a more competitive business environment. It is unrealistic to expect that these jobs will return to the United States with salaries that support the current artificial high costs of living. It is therefore economically damaging to implement policies that subsidize real estate and increase the cost of living. In order to create jobs we must be competitive and the only way to do so is by allowing the markets to be free and competitive on all levels. A competitive business environment cannot exist as long as we have excessive regulation and market manipulation in the real estate sector. By removing regulations jobs would return but the American workforce would have to adapt to a more competitive salaries which would not allow them to afford the current artificial high cost of living that is subsidized through market manipulation. Unless the United States is willing to cease its interference in the market place and allow real estate to correct there is no chance that we will see a fundamental economic recovery. It is therefore imperative to allow Real Estate to correct by ending the non-sense costly market manipulation which only ensures artificial high price stability and dependence on Government.