Thursday, August 16, 2007

OT: Economics- Market Woes

Wow. Two posts about economics in one month. I guess I have work on the mind. The Big Picture, which is one of my favorite economics/ business blogs, points to a editorial found in the Wall Street Journal.

"The current crisis is the result of the normal ebb and flows of credit cycles, and the free market will amply handle the correction that is already happening. Calls for Federal Reserve intervention or for other governmental involvement -- including an increase of the Fannie Mae/Freddie Mac lending limits -- must be rejected.

In the free market, those that made bad credit decisions must be allowed to pay the price, and only by paying dearly can lessons truly be learned. Borrowers who were unwitting and took on too much debt must learn that there are consequences for their actions. Homebuilders that built too many homes or overpaid for land need to face the consequences. Wall Street firms that provided credit to all of these activities with too much laxity must also pay a price. This is all part of a healthy correction.

All of these players reaped benefits during the housing boom that preceded the current crisis. Certain homeowners were able to temporarily live above their means. Homebuilder and bank profits have been exorbitant, and shareholders and executives of these companies have profited mightily in the boom. To not permit losses now would be a direct violation of the free-market ideals at the foundation of our economy."

If you are in the market be sure to keep your eye on the ball. As always, hope for the best, but always be prepared for the worse.

Story Link: WSJ:
Hat Tip: The Big Picture:

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