Wednesday, November 20, 2013

Now, why didn't we think of this.........?

Matt Yglesias suggests borrowing a sensible regulation from New Zealand to gently let the air out of our next "real estate bubble".....

The basic concern about "bubbles" and financial stability that central banks are often encouraged to use as a pretext for tighter monetary policy. But instead of tight money, the Reserve Bank has responded with tighter mortgage regulation—basically requiring larger downpayments for most mortgages. That limits the downside risk to the economy if house prices do crash in the future. And it might even restrain future price appreciation. But it doesn't try to "prick" a bubble by creating more unemployment. That's the way it should be done.

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