The voice of reason

Finally some sanity. As I mentioned yesterday it has been a peculiarity of Anglo-Saxon politics to be obsesses with encouraging people to buy their houses, irrespective of whether they can actually afford them or not.

Their logic is it creates a wealth effect (assuming prices go up of course) and encourages citizens as house-owners to be responsible members of society.

In practice of course it also encourages people to take on huge debts with minimal equity buffers in their property's value, and reduces their mobility due to the transaction costs and time-consuming nature of property transactions. It also encourages them to be totally irresponsible in the event of falling prices and simply walk away, leaving banks holding huge portfolios of defaulted property which they then have to dump onto a falling market.

The result was 2008's economic debacle.

Yet still politicians don't seem to get it. Two days ago Britain's David Cameron announced he would be using government funds to encourage building - increasing the supply of property at a time when house prices are falling, and to encourage higher borrowing among purchasers. This is almost a guaranteed disaster, and borderline criminal lunacy. Encouraging higher borrowing so people can get themselves "onto the housing ladder" when house prices are already falling, and at the same time increasing the supply of houses can only end in tears. And as ever, taxpayers will have to foot the bill when it all falls apart.

At least one person seems to get it though. "

Housing market 'unlikely to recover', says Bank of England expert"

Let's just hope someone pays attention.