| Kasz216 said:
Ah this just reminds me of an article I heard about today. http://www.ft.com/cms/s/0/c02f081e-3ba8-11e1-bb39-00144feabdc0.html#axzz1jMb0F3Tr Which also ironically explains why if anything the Crisis in Greece, Italy and Portugal are related to trying to create income equality. |
It is my opinion that the economy has multiple very powerful negative feedbacks built into it, and many actions powerful actors take within the economy result in (often larger) counter-reactions that return the economy to a balanced state. This results in many actions taken by governments having counterintuitive results.
The classical example of what I'm talking about is how loosening credit for mortgages tends to result in higher house prices and less affordable homes. Regardless of whether people are putting a 5% down payment on a 40 year mortgage, or are forced to put 25% down on a 15 year mortgage, the competition for homes will ensure that (over time) the same house will be affordable to people of the same income level. This is unfortunate for those individuals who can not afford a home though because, while the money they save could have a substantial impact on the monthly payments for the lower priced home, the increase in house prices effectively prevents them from ever saving up enough money to buy a home.
To use an example ... In Calgary starter homes were priced at (roughly) $75,000 in the late 1990s and by the end of 2006 were $300,000 due to changes in mortgage qualification rules. While it was plausable for a low income earner to save up $25,000 to reduce the potential mortgage payment and qualify for a home in the late 1990s, those same people would never be able to save up the $100,000 to get similar savings today. As a result, action taken to make houses affordable has made houses less affordable.
