A reason to raise the debt ceiling? Not a chance.

This article from Politico is good only for a laugh.  According to the author of the article:

Mortgage firms Fannie Mae and Freddie Mac could lose the top-notch ratings made possible through their government conservatorship.

Tucked into Moody’s recent report is a footnote estimating that, without explicit government support, Fannie Mae and Freddie Mac would have the equivalent of a B2 junk bond grade.

The author sees this as a doomsday scenario for the housing market, and it never occurs to him that this is exactly what should happen.  Fannie and Freddie made horrible decisions, and not only should their ratings be in the toilet, but they should no longer even exist.  That they have a top-notch rating at all just goes to show what a fraud these ratings agencies are running.

The author then goes on to lament:

A destabilizing element such as a rating downgrade could present extreme problems. Current homeowners might not be able to refinance in a panicked environment. And housing prices — now at 2003 levels, according to the S&P/Case-Schiller index — would sink further.

Well, once again, we see a “horrible scenario” which should actually already be reality.  If we had anything resembling a free market, housing prices would have been low for a while to help alleviate the glut in the supply of houses, and while this may have been an unfortunate situation for current homeowners it would have been a great situation for younger people and first time home-buyers.  Instead the federal government decided to pick winners by trying to prop up the price of housing artificially.

Those of us who follow Austrian economics know that in trying to stave off the correction the federal government has only prolonged the pain, which is the opposite of its stated goal.  The price of housing needs to fall, and the federal government needs to let it.  If not raising the debt ceiling allows this to happen, then that’s just one more reason not to do it.

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