Re: Why bailing out housing market is a very bad idea
DMcW said house prices were over inflated in 1999/2000 and they have continued to be inflated and still are today. This does not mean he was wrong in the medium term, it just means that the Irish public didn't listen and prices were let run wild.
That point makes no sense whatsoever.
DmcW audience at the time when he made those statements was the lay man on the street. And that's the crucial point.
When he said back in 1999 (or whenever) that house prices were overvalued, what the layman heard was that they will drop in the near term.
That is how people interpreted that statement - and Mcwilliams well knows it !
In short - with such statements, Mcwilliams was essentrially predicting a drop in house prices in the short term.
That was basically his message given his audience.
And you can try to dress up his statements any other way you want.
You can argue all you want saying the fundamentals of the day justified his point - and that with each passing year his opinion on fundamentals versus house prices continued to more than justify his point.
But the botton line is he got it wrong - and not only that, he got it badly wrong - irrespective of what the fundamentals were !
And not only did he get it badly wrong, he got it badly wrong on teh most important financial topic of the day.
Prices rose significantly in the medium term.
In my book - that mistake was too big to give him any furher real credibility as an economist preaching to the nation.
For an economist, being aware of the fundamentals is only half the battle - predicting human behavious is the other half.
Had he said,for example, that the fundamentals didn't justify the current prices yet he felt that prices would continue to rise due to the irrational behavious of humans, then I would give him the kudos.
Focussing only on the fundamentals and assuming that prices/human behaviour would be dictated by fundamentals in the short to medium term is folly.
The very nature of a bubble is that in the short to medium term it ignores fundamentals.
McWilliams - to my knowledge - failed to include that point.