Actually, the trouble in the U.S. economy is that we have, for the last 20 years, subsidized the most unproductive form of capital accommodation. This housing capital gives you some, you know, utility services, but it's not productive in terms of increasing the productivity. We've not invested enough in machinery and other stuff and more in housing stock.
And I think to try artificially to prop up the housing market doesn't make sense. There's still a huge excess inventory of homes.
And I think we at some point realize that probably continuing subsidizing of property is not going to be the right solution. There has to be a price adjustment. The inventory has to be worked out. This housing recession is going to continue for a while. Home prices have fallen from the peak already 25 percent. My own work suggests they're going to fall another 15 percent, 14 percent, just to bring it back to what the real home prices were before this bubble started.
So we have a huge bubble, and we should not do things essentially artificially to try to prevent that market process from occurring. And I think that, over time, actually, if we have less homes and less investment in housing and more investment in productive capital, that's going to be good for the U.S. economy.
