Obama and the Economy on Meet the Press

On Meet the Press this Sunday, Obama said he is concerned about the "the failures of the economy, despite the fact that we grew for seven years, to provide rising levels of income and wages for the American people, I think, indicates the degree to which we've got to fundamentally shift how we approach economic policy."

I wish Brokaw had grilled him on specific policy shifts. Getting lower incomes to rise in parity with GDP is a great goal. How do we achieve it?

Obama:

It is true that there may be some folks who didn't make the best decision that will still benefit from the home foreclosure plans that have been put forward. But keep in mind that many of these folks were not so much speculators as they were probably in over their heads. They tried to get more house than they could afford because they were told by these mortgage brokers that they could afford it.

In other words he doesn't want to bail out investors, only the foolish. I hope the next foolish thing people do doesn't cost so much.

He goes on about doing this will help keep houses expensive, which is totally false. Prices are determined by supply and demand. Price supports would work by restricting new construction and paying people to leave their houses vacant and unrented. That would create a real shortage to justify the speculative prices we have now.

All of this is just talk, nothing real. The Fed will continue to pursue a loose monetary policy, allowing inflation to be higher than it was for the past ten years. Real estate prices will fall to historic norms, and the pain will be masked by the inflation. Let's just hope the fed doesn't stay too loose, or will end up with another speculative bubble and another bailout for the foolish in about ten years.