This bit from John McCain during the debate last night is bugging me:
I am convinced that, until we reverse this continued decline in home ownership and put a floor under it, and so that people have not only the hope and belief they can stay in their homes and realize the American dream, but that value will come up.
He’s clearly talking about the decline in home values, not ownership… and in the doing, he proves the truth of his admission that he doesn’t actually “get” the economy. In fact, suggesting that the government should “put a floor” under a commodity price betrays a serious flaw in his understanding of capitalism, and perhaps free democracies as well.
So listen up, Senator. You (and lots of other folks) are thinking about this all wrong. Home values are not fixed tangibles beneath which one can belatedly add a floor, and the more commonly-used “bubble” terminology doesn’t really work either.
The best analogy for the situation is an overfilled balloon.
Even children know that eventually, balloons float back down — but they come back much faster when they’ve been pricked.
Now.. it’s true putting tape over the hole (aka “putting in a floor”) will mute the hissing sound of escaping air, but it won’t help in the long run. It can’t — because the structural integrity of an overfilled balloon is unsound, and when it hits a stabilizing environment and begins to ascend again, it won’t take the pressure.
It will burst.
Not only can we not artificially float a balloon for any length of time, I’m not sure why anybody would want to… because the higher they go, the more difficult they are to reach.
We really need to just let these balloons to float back down within reach of their own accord.
That’s a good thing in the long run, and the best thing we can do is let this play out — without tape, or artificially-positioned floors.