Government Response to Housing Crisis

Introduction

There has been much discussion of what economists could have done differently to help avert the 2007 financial crisis and "Great Recession" that followed. One issue concerns information supplied by economists to the general public about causes of high appreciation in home prices and their likely future course, as good information could have helped the public hedge their finances against downside risks while bad information may have encouraged them to take on too much risk. This paper analyzes data on views of economists as to whether bubbles were forming in the state's housing markets. We find that the public was fairly decently served by economists offering their views via the media - although with some significant problems of biased forecasts not made in good faith, and of inattention to concerns about "harm avoidance" that ought to apply when economists share their opinions in this way.

The Genesis of the Housing Bubble

Imagine that your car starts making noises and behave strangely. In some faults, things start well, and partly it is normal that we give them too much. The fact is that eventually the noise becomes more continuous, the car can be pulled, or just breaking shocks. It may be, therefore, that in principle we are not aware of the damage, and may even come a time in which we are aware of it but not fix it hurts us because we cannot or because we try to get to the pay extra. But if we ask the question: should fix the car? Understand that no one will answer no.

All this analogy comes to mind with one of the things we find when we talk about reforming the mortgage law (Smith, pp. 32). It's as simple as analyzing reality. Anyone who thinks we have a problem in the housing market would have to be crazy looking for ways to fix it. It's that simple. In the same way as when we know we have a fault in the car, what we need is to take the workshop and exchange of parts that are needed, if we have a problem with housing, we have to get to fix it by changing all that bad.

All this analogy comes to mind with one of the things we find when we talk about reforming the mortgage law. It's as simple as analyzing reality. Anyone who thinks we have a problem in the housing market would have to be crazy looking for ways to fix it. It's that simple. In the same way as when we know we have a fault in the car, what we need is to take the workshop and exchange of parts that are needed, if we have a problem with housing, we have to get to fix it by changing all that bad .

The Western world has begun the journey of the century with one of the worst economic crisis known as much for its huge magnitude and the number of countries affected. The problem arose when an unjustified ...