Oil and Housing

Don Boudreaux made a great point today at the Cafe Hayek blog that I have not thought about. Why is it okay for one type of asset to increase in price and get government scorn and yet another asset declines in price (moderately I would say, 10-15%) and the government does everything it can to get the price to rise? Let's call the first asset apples and the second asset oranges.

Would people say it is fair to have government suppress the price of apples yet welcome the increase in oranges? In fact government is proposing programs that would use money made by apple growers (windfall profits tax) to support the prices that orange growers get for their oranges. That does not seem right does it?

Now replace the above apples with oil and oranges with housing and see if it makes any more sense. It does not. Assets are assets and there are times when it is better to own or produce assets over others. Right now it is better to own oil production than a nice home on the coast. 5 to 10 years ago it was certainly the other way around when crude was around $10 per barrel and homes on the coasts were appreciating 10-20% per year.

Cheap oil is not a right and neither is a guarantee your house will appreciate in value. Both assets' prices are functions of the market and what consumers around the world value. Right now consumers value crude oil more.