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> CDOs allowed more finance to flow to housing, which in itself is a good thing - we need more housing. There's a big leap in that statement. Money is made up

by o11c 2y ago

> CDOs allowed more finance to flow to housing, which in itself is a good thing - we need more housing. There's a big leap in that statement. Money is made up and "doesn't matter" (except that we choose to structure our society to pretend it does); what matters is actual productivity. If you want to solve the housing problem, you have to produce more houses; if you just throw money at the problem, the market will expand to consume all available money.

mmooss 2y ago
I understand the philosophical concepts about money, fiat, productivity, etc. I don't understand what you mean beyond that: It seems like - maybe I misunderstand - you are dismissing money as a store of economic value; a means of liquidity of resources; and its essential, overwhelmingly powerful role in productivity, including real estate development. In this case, the CDOs provided liquidity to mortgages, and that reduces the cost of buyer financing and increases demand for housing. In particular, they financed mortgages for people with poorer credit - generally less well-off people, the people for whom housing is an issue. Increased demand should attract resources to homebuilding, and result in more homes and lower prices for that market. > the market will expand to consume all available money Yes! We want the housing market to expand. ?
- o11c 2y ago
  In some respects it is similar to the student loan industry: when the system makes money readily "available" but it's hard to actually increase the supply, prices rise radically; since this is a loan rather than a handout that means making people actually worse off. Or in other words, it mainly just steals (the industry term is "extracts value from") the productivity gains from other parts of the economy, rather than actually adding productivity. I'm not trying to make a philosophical point really - just pointing out that you can't get a honest picture of economic concerns if you think from the perspective of the finance industry.
  - mmooss 2y ago
    That's what small government, anti-welfare political groups say about student loans (and it's popular on places like HN), but it doesn't match basic microeconomics. If demand goes up and then prices follow, then the market attracts supply until prices drop to essentially the least profit that suppliers can sustain. In the end, you have more demand - including students who couldn't otherwise afford college - and more supply. Of course, colleges will anticipate that and increase supply before prices peak. > it's hard to actually increase the supply Why would it be hard to increase supply of homes or college educations? > you can't get a honest picture of economic concerns if you think from the perspective of the finance industry. Yes, agreed.

by o11c 2y ago

mmooss 2y ago

I understand the philosophical concepts about money, fiat, productivity, etc. I don't understand what you mean beyond that: It seems like - maybe I misunderstand - you are dismissing money as a store of economic value; a means of liquidity of resources; and its essential, overwhelmingly powerful role in productivity, including real estate development. In this case, the CDOs provided liquidity to mortgages, and that reduces the cost of buyer financing and increases demand for housing. In particular, they financed mortgages for people with poorer credit - generally less well-off people, the people for whom housing is an issue. Increased demand should attract resources to homebuilding, and result in more homes and lower prices for that market. > the market will expand to consume all available money Yes! We want the housing market to expand. ?

o11c 2y ago
In some respects it is similar to the student loan industry: when the system makes money readily "available" but it's hard to actually increase the supply, prices rise radically; since this is a loan rather than a handout that means making people actually worse off. Or in other words, it mainly just steals (the industry term is "extracts value from") the productivity gains from other parts of the economy, rather than actually adding productivity. I'm not trying to make a philosophical point really - just pointing out that you can't get a honest picture of economic concerns if you think from the perspective of the finance industry.
- mmooss 2y ago
  That's what small government, anti-welfare political groups say about student loans (and it's popular on places like HN), but it doesn't match basic microeconomics. If demand goes up and then prices follow, then the market attracts supply until prices drop to essentially the least profit that suppliers can sustain. In the end, you have more demand - including students who couldn't otherwise afford college - and more supply. Of course, colleges will anticipate that and increase supply before prices peak. > it's hard to actually increase the supply Why would it be hard to increase supply of homes or college educations? > you can't get a honest picture of economic concerns if you think from the perspective of the finance industry. Yes, agreed.