Thursday, January 22, 2009

Another money quote on the economy

This one from Warren Buffet, summing up what would be required to ensure that there is never another housing bubble/explosion (interview for this show, blog entry with entire transcript here):
WB: Well you can have a rule for example to prevent another real estate bubble; you just require that anybody bought a house to put 20% down and make sure that the payments were not more than a third of their income. Now we would not have a big bust ever in real estate again...

Quite possibly one of the biggest "duh" statements about the economy in recent times, yet equally astounding that politicians still fail to grasp that this would be a good idea. One of the reasons the country is so f-ed up is that even with this blindingly obvious concept, clearly stated, we're creating trillions in new debt, thousands of new regulations, and thousands of new policies, procedures, and regulations all designed to specifically avoid implementing the simple and obvious prevention solution. Even Buffet acknowledges such later in the same response:
...where the balance is struck on that will be a political question. My guess is that it won’t be struck particularly well, but that’s just the nature of politics.

1 comment:

  1. Totally true. And during the next expansion, maybe the Fed could try to steepen the yield curve to drive up mortgage rates. If we're trying to drive rates down now and our goal is really to stabilize prices (avoid peaks and valleys), shouldn't it work both ways.