I don’t see how any of this is relevant to anything I’ve said (or why you assume I’ve neglected to assume any of this 
).
If in a competitive auction for an asset you introduce a set of bidders that will pay market price + 20%, the market price will increase - ceterus paribus.
You’re the one who made the claim that this plan would work. All I’m saying is that I don’t see evidence that it will. Traditionally, the person making the claim (you) is the one to provide evidence for it, not the person suggesting the null hypothesis (me). Suggesting that your anecdote outweighs my cry of “cite!” is pretty foolish.
Buying a house they can’t afford. I’m really not asking you to make a tremendous logical leap in understanding that a decision that had a really bad outcome was a bad decision.
I see what you’re saying about people relying on experts, and the experts misleading them. That definitely happened. But I haven’t a priori decided anything about homeowners motivations. I don’t care about their motivations. I’m stating the simple fact that they invested in something that lost money, ie, they made a bad investment.
I disagree. And this is really the crux of our disagreement. Of course you don’t think that moral hazard is an issue if you think that success or failure in the market is just a consequence of luck. If that were true, then I’d agree with you. The value of having consistent rules is that people can learn from previous mistakes. If there aren’t actually mistakes to learn from, and everyone’s just muddling about hoping to get rich/not get poor, then it makes sense to cushion the blow for the unlucky few who come up on the bad end of the craps table.
Except that’s not true. You know how I avoided buying a house in the middle of a bubble, even with everyone seeming to say it was a good idea (and my parents repeatedly urging me, even telling me that they would help me with a down payment)? I spent an hour with Excel, estimating the results of two scenarios (1) buying, (2) renting and investing the difference in the stock/bond market (or, in later years as rents rise, pulling the difference out of the stock/bond market). I looked up the long-term historical housing and stock/bond market growth rates. And it was clearly a fool time to buy a house. I have a hard time calling what I did, the most basic due diligence, “luck” (I have a hard time calling it wisdom, too, but I guess compared to the collective dumb-assery in the housing market over the last decade, it might qualify). Nothing I did requires more than a high-school math. No economists’ opinions were solicited (except, I suppose, whichever economists were involved in defining various inflation standards and other indices I used).
New and existing housing are substitute goods. You can’t just meddle with the price of one without affecting the other, and the fact that you think you can is not really a mark in your “convincing on economic policy” column.
This is a joke, right? It’s a proposed government program to give private party A a benefit (provided by the government) in exchange for excess payment from party A to private party B. Are you debating in good faith?
You didn’t ask me for a cite. You made an indirect claim. As I’ve already stated, I’m not an expert on immigration law. So, I think if anyone is making foolish statements in this thread, it’s you.
Um, no. Some people may have bought a house they couldn’t afford. But some people may have bought a house they well could afford at the time. Some people may also have bought a house that they can currently afford, but are still underwater the same. You simply refuse to consider any other possibilities except the one you have settled on. Being underwater doesn’t necessarily mean what you claim it means.
Fine, it is currently a bad investment, but that’s not the definition of a moral hazard problem.
So, let’s take a case that happens from time to time. Person A purchased property in a neighborhood. Half the properties are bank-owned, because of foreclosure. The banks are illegally failing to maintain the properties, causing blight. This has depressed the value of Person A’s property lower than it should be. Why should Person A have to suffer because of this? Person A hasn’t done anything wrong, it’s the bank-owners that are doing something wrong. What exactly is Person A supposed to learn in this scenario? The laws that require bank owners to take care of foreclosed property aren’t being properly enforced. And yet somehow, according to you, I guess we blame Person A for this scenario?
I can keep listing these type of unforseeable externality problems, if you’d like. But I think it’s fairly clear that you are unable to even consider these.
And finally, acting as if we have some set of consistent rules here is pretty laughable. It’s clear the banks were engaged in a bunch of dubious activities that were against the rules, and they are not being enforced. And yet, here you are complaining about something that’s not even a government handout, because some individual homeowners may see a personal benefit.
Oh, please, we’ve reached silly territory here. What you did is beyond the skill of most lay people.
I’m well aware of what substitute goods are, and this is the completely wrong place to use that argument, since the Blue Card doesn’t attach to new housing (which is why I find you even less convincing then you think you are). What you fail to realize is that we currently have an underutilized new construction market. And what you also seem to fail to realize is that there isn’t a fixed supply of new construction, since you can actually build new houses.
No, it’s not a joke, but I can see that your arguments are.
Your simplified model doesn’t cover any of this. It’s fairly clear that it doesn’t. Do you disagree?
Whatever dude. That’s only true in a theoretical model with certain types of supply-demand curves. In the real world, prices move or are sticky for any number of reasons. This is why it’s difficult to figure out exactly what is going to happen in the real world.
But if you are really worried about this, we can put in the following rules:
A particular property is only eligible for the Blue Card program once. This means after the initial sale, the property goes into the pool with the post-crash housing, and therefore it should not permanently inflate.
We can drop the requirement that Blue Card holders have to maintain any property after the initial holding-on period.
We can shorten the initial holding-on period to one year (or maybe even less).
I just want to tackle this bit of duplicity here. Let’s go back to my OP:
Learn how to read before you start lecturing me on what I claimed. This could have been a cordial and interesting theoretical discussion, but it’s clear that you have some sort of bee in your bonnet. If you can’t discuss economics without getting emotional, maybe you should step out of this thread. I’ll also point out that I responded in a cordial manner to the first couple of posters who raised issues with this model, but you decided to wade in hear and for whatever reason, act like someone was personally offending you. I don’t even have enough roll eyes for your behavior in this thread.
So, I don’t know if this article is accurate or not (I’ll have to do more research):
So, let’s assume that’s true. Some % is pre-crash, and some is post-crash. Let’s say 10% is pre-crash (I suspect it’s higher). That’s still an extremely large amount of housing. I would be surprised if the number of Blue Card potentials could fill that. And if they can’t fill that, then there shouldn’t be a permanent 20% inflation in pre-crash home prices. Theoretically, you’d calculate the percentage of properties which could be sold to give you the factor which home prices would rise on average. But in the real world, my guess is that you’d get an initial 20% rise, followed by a drop back to normal as the Blue Card holders move through the system.
But, if we make the changes I suggested in post #24, that temporary blip will move out pretty quickly.
One more thing about the substitute good argument. If post-crash housing and Blue Card housing were actually substitute goods, then what should happen is that the post-crash housing would work to depress Blue Card housing prices. Because someone who isn’t worried about a Blue Card would go buy the post-crash housing, since it’s cheaper. In order to think that this would lead to a spike in post-crash housing prices, you have to assume that we don’t have a glut of post-crash housing and that our post-crash housing is relatively fixed in supply. Neither of these things are true.
Of course, they’re not substitute goods at all, since the Blue Card doesn’t attach to post-crash housing.
Eek. I’m posting out of order here.
This question assumes that there isn’t a glut of post-crash stock. I don’t believe this to be the case. If post-crash stock gets thin, you can always end the program.
You can still have lived within your means and saved up for a down payment and be underwater. I’m not going to agree that the fact that you are underwater is indicative of what you did or didn’t do. There are simply too many externality problems at this point that are dragging down the market. You’ve made an a prior assumption that being underwater means you didn’t save and means you didn’t get a fixed rate mortgage and all sorts of other things. This neglects things like blighted property and foreclosures which depress property values. This neglects things like fire sales which depress property values. And this neglects that we have 10% unemployment, so people who might have made, what are according to you, the “right” decisions now find themselves unable to cope.
I’m worried about creating a trading market in Blue Cards, which is why I don’t want to allow people to sell them. The reason I’m worried is that a trading market could inflate into it’s own bubble. If it’s the case that people are actually being priced out because there’s so much demand for Blue Cards, we can end the program. But I would be surprised if there’s enough Blue Card demand for that to happen.
Well, you quoted a poster who called me dumb, and then followed it up with that. I don’t know. I guess I was expecting people to come up with issues here and help me refine the model, but maybe this is the wrong place for that.
Anyway, that’s it for me for now. Work calls. I probably won’t be able to check on this thread until the weekend.
100%. I have no idea where you’re coming from here.
Like, whatever, dude. The idea that introducing a set of bidders willing to pay higher prices won’t lead to higher prices is absurd. Situations in which it does happen that way are the exception, not the rule.
Yes, these are a step in the right direction.
And you assume there is a glut of post-crash stock. Here’s a graph of new housing starts:
http://www.census.gov/briefrm/esbr/www/esbr020.html
I think it’s reasonable to infer from that graph there is much, much more pre-crash stock than post-crash stock.
Sure, that exists in some situations. What percentage of people fall into that category? Also, I haven’t attacked underwater people. Rather, I’ve pointed out that your program is unfair to people that wisely/luckily stayed out of the market.
Simple - don’t allow them to be traded.
What are you talking about? This never happened. I haven’t quoted anyone but you in this thread. You’re posts are coming across with a really passive-aggressive tone.
I don’t think I’ve been particularly emotional or inflammatory. I’ve called a few arguments foolish or unfounded, and after a brief review I stand by those statements (although if you point out individual cases in which you think I was being a jackass, I’m open to retracting them and apologizing). Either way, I’ve dialed way back on the glibness.
I’m not sure if I understand your point here. My position is that moral hazard arises when you remove risk (or, really, reallocate it to someone else). Buying a house is not a 100% safe endeavor. There are risks. So, retroactively changing the rules to undo the bad economic outcome (what I called bad decisions before) effectively causes the moral hazard. In future economic bubbles, people will be more likely to go all in even if they have doubts, because they think the government will help them out later.
That housing isn’t a risk-free investment.
The possibility that you will lose money on a house (or any other investment purchase) is not an unforseeable problem. I’m sure you can come up with specific scenarios that people didn’t see coming, but that doesn’t mean that the general outcome was unfathomable.
I don’t think the rules are consistent. I think they ought to be consistent.
For people who are buying a Blue Card, they are not substitute goods. For people who need somewhere to live, they are. There are (far) more of the latter than the former, which makes new and used housing mostly substitute goods.
Maybe that’s true. I think (and really hope) that you’re wrong. I really hope that high school math, using a spreadsheet program, and a little googling isn’t actually beyond the skill of most people planning to buy a house.
It sounds like you’re saying that starting your post with “Or maybe not” means you haven’t made any claims at all.
Ok, so I was thinking about something today. I live in a neighborhood that’s zoned for 3 stories, but it’s in a valuable part of town. A few years ago, a hotel wanted to open up and they were seeking a five-story zoning variance. I didn’t really protest it or anything, but I found it a bit annoying, because the city council was considering giving just them the five story variance. But if the five-story variance were given to everyone, then everyone’s property values would increase. So, I did find it annoying that the city council was trying to give somebody a property right that I wasn’t entitled to. So, I can see how people would be against this plan.
I’m swamped with work, but I still think it’s an interesting theoretical exercise. I wouldn’t characterize the Blue Card as a subsidy, though. It’s, IMO, rent-seeking.
Bumping this to point out a news story.
Looks like this idea is being considered.
Heh. Thanks for the link. Maybe we have a congressional aide who’s a doper.
I think it’s a bad idea. First of all, it’s debatable that “we have a problem where home owners owe more than the house is worth”. I don’t have that problem. I see an opportunity to upgrade my home at a decent price. There are plenty of people like me.
I believe it’s also debatable that it is a “crisis”. The mortgage crisis happened in 2008. Now it’s just “the price”.
Call it what you want, but it still amounts to a government subsidy. It creates a moral hazard in that it is supporting communities that overbuilt and were overly dependent on real estate speculation as their main “industry”.
And what happens in 5 years once that lockout period expires? You get another bubble when all these foreigners try and sell their homes.
The economy tends to fix itself if people stop “doing things” to fix it.
Example of confirmation bias. Not any better of an idea because some Democrat senator likes it.
Speaking as someone who hates the poor and wishes to see their further opression, I fully endorse the OP’s idea.
Not only will it grant privileged status to rich foreigners over their more modest countymen, it will also help keep home prices inflated beyond the reach of the domestic riff-raff who have been renting and might try to enter the housing market.
In the long run we are all dead.
Rather than distort the housing market, just sell the visas for $250k and use the money to provide unemployment payments or other cash supplements to people in need.
MSMITH is right. The bubble has burst. Why would you want to try and blow it up again?
More apropo would be selling 10 year visas for $250K based on an arbitrary appraisal of the value of a visa over 10 years, and then when we’ve taken in enough money, inform the purchasers that the market has determined their visas are only good for 5 years.
The economy does not fix itself. That is Greenpsanian /Libertarian "logic’. It will just get worse and worse.
America is designed to have an adversarial relationship with government and corporations. For some reason we are OK that corporations will do anything to make more money. If they really were people we would declare them psychopaths and medicate or jail them.
Yet people who deal with them are still expected to adhere to ethical and moral stances.
So apparently some home owners have adopted corporate morals. If it will profit your family to walk away from a mortgage, then it is just good business. How can a corporation judge them for that?