There were many who saw the bubble in housing back in 2004. There were many who saw that the rise in Home Equity Loans was driving consumption forward. At one point HELOCs drove 40% of consumption. The FBI warned early about mortgage fraud. The Chairman of the Fed was warned by many within the Fed.
But also people warned about the dot.com bubble. All they had to do was understand math.
Problem is perception beats reality hands down every time. We choose to believe what we want to believe.
With homeowners still representing over 64% of households, they want to believe in a recovery. That is what is key, what they want to believe. The spin masters can then feed into that.
Here's some little-realized truth. Money is just the medium of exchange -- it is green pieces of paper, and entitlement thereto. Mispricing of homes, for example, just misdistributes the green pieces of paper -- it does NOT change value. "The big con" equates value to price, as though there were zero mispricing. This everyday fooling of the people is central.
There were many who saw the bubble in housing back in 2004
Someone who "saw" the bubble implies that they BOUGHT in 2004 and then SOLD in 2007.
But basically nobody did that. The eternal pessimists said it was a bubble in 2004 and also in 2003, 2002, 2001, ....1995. They continued to say it was a bubble until it finally popped, and then they told everybody how smart they were for not buying. Meanwhile, people who did buy in 2004, used their equity to get an even nicer house, a new car, and pay for their kids' college, and then refinanced down to 3.25% last month just nod.
Observing that there was an asset bubble wasn't hard. The hard part is figuring out when it's going to burst so that you can take advantage of it.
I can predict right now that there will be another housing bubble, stock bubble, gold bubble, and oil bubble within the next 100 years. This helps absolutely nobody, but at least I can claim to have "seen it coming".
If you're in agreement with this article, I ask you this: What are you doing to take advantage of the situation? Telling other people that only a moron would buy a house isn't doing you any good.
Bubbles are the enemy of the people.
Financial asset mispricing, effect on the common good:
equal and opposite effects on buyer and seller, net = zero;
equal and opposite effects on all the asset-holders together and on all the asset-non-holders together, net = zero;
rational pricing is better for the common good than is irrational pricing because rationality is more likely to be there tomorrow than is irrationality -- giving ‘a more stable environment for all of us to plan our lives’ (Shiller).
I reckon that the foregoing is obvious, and I reckon that the following is obvious.
The MAIN ENABLER of sizable asset price bubbles is keeping the real price histories seldom seen. Look: http://showrealhist.com/yTRIAL.html