Oct 152013
 

Here’s the gist of it.

Assuming that ‘demand’ without the ability to pay now exceeds ‘supply’, the availability of extra finance will bolster prices rather than satisfy that demand. (That’s because sellers will each try and get more of the money being made freshly available.)

The non-availability of extra finance won’t cause such a distortion. (Obviously.) Prices will, instead, have to adjust to suit current purchasing power.

The latter is a far more effective way to distribute scarce resources.

It is simply that of letting markets function on their own - without direct financial intervention.

If any specific non-financial market (like e.g. housing) ever needs intervention, anything which is believed to be appropriate ‘other than’ direct financial intervention might help.

Direct financial intervention in any market (other than the money markets themselves) will however, merely distort the market in question.

QED

Posted by: Property Match (UK)/Asking_Prices: Peter Hendry, Consultant in Housing Valuation, Property Match (UK).

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