The faster house prices fall, the better off we’ll all be

Something must be done! This is something. Therefore it must be done. Following such logic, governments have blundered into all sorts of interventions which they have subsequently lived to regret.

But don’t prop up house prices. They have got wildly out of line with the economic fundamentals. They can only get back into line by falling or by the fundamentals adjusting to those prices. The latter would mean higher wages and salaries and that would entail much higher inflation for several years. That is a route we should want to avoid at almost all costs. Accordingly, it is house prices that have to do the adjusting. The faster that they fall, the sooner that they can get back to a reasonable level and normal conditions can resume.

» The faster house prices fall, the better off we’ll all be – The UK Telegraph, 4th August 2008.