Page 396 - 2019 6th AFIS & ASMMA

The same goes for our interest rate change. When a long-term interest
changes, as a central banker, we hope that the short-term interest change
is not as unexpected as long-term interest change, but still a long-term
interest can be unexpected. Also, due to global financial synchronization,
all the national financial markets move together in a synchronized way
these days, so international diversification won't help much in this case.

An observation I made is that it is subsidized by the government. But
such subsidy goes to homeowners who are usually wealthier than non- Session III
homeowners, so it gives some strange implication that the government
subsidy goes to wealthy people than not so wealthy people. In a worse
case, subsidy may end up benefiting financial companies instead of
homeowners, so we have to be careful about it. So based on these
observations, here are my thoughts on what reverse mortgage should be.
Mostly by providing liquidity and providing insurance, reverse
mortgages can smooth consumption. But which consumption? Housing
consumption may not be smoothed because homeowners are, I don't
know if they are allowed or forced to stay in their homes, but for reverse
mortgage that's the idea; allowing homeowners to stay at their own
home. So that may lead to less than optimal consumption for goods and
services because the level of housing consumption cannot be changed,
hence consumption for goods and services as well cannot be adjusted
accordingly.

First, it is again a government subsidized program, so it has to be a
public good; it has to benefit not some, but all people in general public.
Also, it has to indigenize house price dynamics and demographic

398 2019 6th AFIS & ASMMA Annual Meeting 399