Grads Moving Back Home

According to this article graduates are moving back home at a pretty large rate. This is not bad news, despite the articles dreary tone. This means that recent grads (myself included) are finding it tough out there. They are largely unemployed, thanks to this terrible unemployment rate and are finding it tough to make ends meet.

The real reason they are moving home, however, is that the banks are no longer giving out essentially free loans to anyone with a pulse any more. This is a positive development. After a false boom created by the government shoveling money into the people's hands by printing it and falsely lowering the interest rates, there comes a necessary bust. People spend too much in the boom and save during the bust. This does not have to happen. This goes into the business cycle which will get its own post in the not too-distant future.

The best news from grads moving home is that this will lower housing prices. How is this a good thing? We all want loan policies to be corrected but not prices. Unfortunately, this is impossible. Loans were bad because the prices were bad. The prices of homes need to return to market rates, not artificially inflated rates caused by a government keeping interest rates artificially low by printing cash. People moving home is a positive step in this harsh recession that will hopefully get the market back on track. The government created this mess and now we will have to suffer for it. The prices of housing will hopefully, eventually return to the market rate, as will the interest rates at some point (hopefully, even though I am not nearly as hopeful about the interest rate returning to the market rate).