Last week, the Federal Reserve Chairman Greenspan described the US housing boom as an economic imbalance that could end badly for its economy. He hoped this will be dealt with by "adjustments in prices, interest rates and exchange rates rather than more-wrenching changes in output, incomes and employment".
He could easily have been speaking about the Irish situation. Given that our State has no control over interest and exchange rates, does this mean that we must await downward shifts in prices, output, incomes and employment to restore balance? The fact that prices have moderated doesn't lessen the problem.
As the Government patently failed to control prices (especially of land) on the way up, can we be any more confident that it will manage a downturn any better?
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