How To: Fix the Housing Crisis

CNN's Jim Cramer year after year that the housing market has found a floor. BoA's Jamie Dimon says the end of the crisis is near (it helps that he also serves on the Federal Reserve board and can bail out his own bank). Millions of homes are reported sold which never actually happened. There are over ten million American homes today that are under water, with 3/4 of those homes current with mortgage owners making regular payments.

There is a pattern of failure here, but that is only the obvious half, that which educated consumers grasp. The other half is ugly and no one wants to consider it, but it's no fantasy. It's real.

As one time, fewer Americans could afford the American dream; home ownership. It is a fine and noble dream, but a nightmare if achieved at involuntary costs to others.

The Federal Reserve did more than their part to promote consumer debt in the housing market. Free markets work by the graces of the Invisible Hand, not the state. Freddy and Fanny were doomed from birth. Hundreds of billions of dollars was not enough to keep them from flatlining. They misvalued their assets well into irresponsible levels.

When state intervention occurs, markets for services and products lose efficiency in terms of costs to consumers. When the Fed holds interest rates at near-zero levels, it encourages private market lenders to follow suit and lend to consumers which have precious little creditworthiness.

Sorry to be brutally honest. Reality happens. Profits and losses are a part of the market, until Uncle Sam opens our wallets.

When the housing bubble burst, few outside of the Mises or Cato institutes saw the parallel to the higher education bubble, which took the same course. The banks hold properties on their books valued at the mortgage value, which sets the system up for fail in the simplest way.

We can fix these failed systems. We have to start over using proven principles to revive matter economies, but not through government programs. The state is the intervening entity which causes its own ailments.

The state must step out of interventionist policies into markets. To remove inefficiencies that produce deadweight loss and drive private forms and households into financial stress,