The Impact of Regulation on Your Financial Freedom

Dave Funk ^ | 02/05/2010 | Dave Funk

[geniusbyosmosis]

I keep hearing everyone say either, “Deregulate!” or “Re-regulate!” What do I not see them saying? I don’t see them offering any rational reason why one is better than the other. I don’t see them telling the people why they will personally benefit from either. When I see this happening, I again, go to the root of the problem and offer you solutions.

The housing market crashed. The derivative market that traded toxic assets helped obliterate our economy. The question is why and what do we do now?

Throughout history going back a century, the value of real estate has only seen growth equal to inflation which basically puts home values flat for most of the 1900’s relative to your personal income. The only reason you would make little money back from selling your house and moving is because you lived there for so long you had enough equity that inflation did compensate you some. Some are going as far back as the Carter administration to place blame while others go to their “fail-safe” mode of blaming the Bush administration. After all, even our President keeps using that card over one year later. While I’m not going to point blame on any one administration, what I do know is that government regulation and policy caused this crash.

[geniusbyosmosis]

Regulation has never succeeded in America. What makes these morons think it will this time?

[Mr. K]

The question is why?

The answer is:

The Banking Queen- Almost SINGLE-HANDEDLY RESPONSIBLE FOR THE ECONOMY MELTDOWN (With Chris Dodd)

[DrC]

“the value of real estate has only seen growth equal to inflation which basically puts home values flat for most of the 1900’s relative to your personal income.”

This doesn’t make sense. Real incomes (i.e., after inflation) have risen pretty steadily over the past 110 years. Real GDP per capita in the U.S. is at least 6 times what it was in 1900. Thus, if housing prices truly simply kept pace with inflation, housing would become more and more affordable every year rather than flat relative to personal income.

My guess is that the “average” house may well represent the same share of personal income today as 110 years ago, but the reason is that the average house is much bigger and has many more amenities (e.g., in-house toilets!) than in 1900. Indeed, the average poor family now lives in housing that is roughly equal in size to the houses typical for middle class families in the 1950’s, which is consistent with this same story.

So if people buy a house in their 20’s and try and sell it 40 years later, it may well be that they did no better than beat inflation in terms of the price of the house. However, a) in the interim, they will have swapped a mortgage debt for 100% equity, so the cash they take out is far higher (even after inflation) than the downpayment they originally put in; and b) many retirees are able to downsize once their children have grown.

Consequently, even after inflation, it is quite possible to have a sizable nest egg left over once the old home is sold and a smaller home purchased etc. Equivalently, many people are able to remain in their homes by using a reverse mortgage to pull out equity built up over decades. None of this undercuts the authors’ central point that regulation got us into this mess. Who could argue with that?

[Monorprise]

De-regulate

Reason:
simple
1: All federal financial regulations are beyond the scope of the United States Constitution.
2: Federal regulations only serve to aid big corrupt financial institutions like Moody helping to keep them in power by allowing their judgment to be used as a part of federal regulators. This alone makes for an unhealthy market, prone to easy exploitation.

3: All regulations an an infringement upon American freedoms and fundamentally unethical, anyone who wants to gamble in the stock/investment market deserves to face the risks of the same gambling unprotected. Allowing them to inflate the currency for theses investment thou fractional reserve banks particularly the Federal reserve not only makes the problem 10 times worse but helps them rob from all other Americans.

[geniusbyosmosis]

The increase in a homes value followed the rate of inflation for much of the 1900s. Your personal income on average will also increase near the rate of inflation unless there are things like changing jobs or other circumstances in your life. But assuming, like most companies, you receive a cost of living raise at the end of each year, the growth is near inflation and near the increase in a homes value.

It doesn’t matter what amenities your home has or that it’s larger or whatever. It has been shown that home value increased this way until approx 1999 when home values started to artificially inflate due to the derivative market.

So while home values have risen, they have risen proportionatley, more or less, to annual income which means they have been basically flat. So comparing Real GDP now versus 1900 has no relevance to this statement and it wouldn’t make homes more affordable because they increase at the rate of annual income.

The entire point is around the growth of home values, not what the home is worth now compared to fifty years ago or what your dollar is worth now compared to fifty years ago. It’s that inflation was artificially boosted in late 90s.