Anonymous to Occupy Wall Street and Create Megathread

[Shofercia]

Anyone who studied the issue, and was honest, was able to predict it.

I can almost list the major experts who predicted the crisis on my hand, you're going to have trouble finding anyone else other than Baker, Roubini, Schiller (and it’s not like people even cared about Roubini, before the crisis he was just a regular economics professor consistently prophesying doom and consistently being wrong about it, until now) and a few other financial experts and traders who actually prophesised the crisis – because I cannot stress this enough, the vast majority of experts in finance and economics, especially including those not tied to any business or corporation, failed to identify the bubble. Because that is what it’s about: your main problem is that you’ve framed the debate in an obviously obnoxious and hyperbolic diagnosis of the crisis, it’s more than simply deliberately “lending money to people that cannot pay back”, because no bank can EVER really know if anyone can pay that their mortgage for sure without spending a huge amount of resources on investigation and accounting of each individual. So what banks typically instead do is have a set of filters you must go through to be ‘credit worthy’, similar to how an insurance company determines its premiums, while accepting that these filters are not perfect and will inevitably lead to a proportion of people defaulting – this cost being determined to be less than the cost of thoroughly auditing every single individual.

However, a lot of people both left and right, complained that the lending standards were unnecessarily strict. Even liberals for instance would argue that the standards were unfair to the working class or minorities. However, for technical reasons too, it wasn’t just for political reasons, some financiers came up with models and ideas about how to loosen standards and even accept a higher rate of default whilst still making money and not becoming insolvent. It was deemed less important if a higher proportion of borrowers would default because house prices were inflating continually so the bank can simply refinance/use the house as collateral, so riskier mortgages without so many strict standards (sub-prime) started happening, and these were diversified and packaged into securities and traded. This model of banking would work so long as house prices would continually rise, or at least not suffer a sharp fall, so basically it’s not about identifying whether “lending to people that cannot pay back” is bad but identifying whether we are in a housing bubble or not. Most banks seemed to think that real estate prices would continue to rise for decades, and I’m not talking about your typical trader/analyst here, I’m talking about quants with PHD’S IN PHYSICS (http://plus.maths.org/content/how-maths-killed-lehman-brothers ) thinking this. And many many experts not employed by any bank did not think there was a housing bubble either, and they had an array of technical reasons to think the movement in house prices represented something fundamental (e.g. land becoming more scarce). I remember reading debates in the economist about whether there was a housing bubble, and to me it certainly wasn’t obvious at the time (although I suppose this was before I was at college studying econ) that we were, I think the claim that anyone could have seen it coming is just plain false, if not a deliberate lie to make reality more politically convenient. In fact, we’re not absolutely sure it is even possible to identify a bubble UNTIL after the bubble has burst for a number of technical reasons (for instance, the argument that if it was ‘obviously’ overvalued, everyone would have already shorted the asset to make a profit causing it to return to an equilibrium price), this is the sort of thing nobel laureates in economics debate over, it can get very complicated, I would not expect any trader or analyst to have special knowledge on this issue compared to non-banker academics. Of course I’m not letting bankers off the hook, there was a lot of fraud and lousy data/record collection that made the value of many mortgage backed securities completely ambiguous.

Regarding the ‘banning’ of lending to people who cannot pay back their loan, this is not feasible literally since as I said before banks cannot have certain knowledge of something like that and there will always be a proportion of defaults from your assets even with very strict lending standards. So in practical terms what you really want is to see tougher lending standards, but this is exactly what is being done already. In fact regulations on lending standards so enraged the CEO of JP Morgan that he publicly accused Bernanke in a press conference of stifling the economy by making it so hard for banks to lend. I’m not saying banking is completely adequately regulated, but it’s not like nothing is being done.

You know, when I thought I had a crappy paper, I made it extra long and hoped the professor wouldn't notice the crappiness of it. Long, has some smart jargon thrown in, follow the writing format, clearly can't be that bad, right?

I find it interesting how you initially shifted from my argument, which is "don't give loans to people that can't afford to pay them back" to criticizing the people that predicted it. Please note that I said was able to predict it, which isn't the same as having actually predicted it. Then you went on to criticize the framing, while conveniently avoiding my main point. Although no bank can know that person will pay back the loan, it's fairly easy for a bank to understand that a person with $100,000 yearly income can generally pay back a $500,000 loan, whereas a person with $25,000 yearly income cannot. You don't need to be an expert, in order to follow common sense.

The banking solution to this was to call the latter type of loans - "high risk loans" and jack up the interest payments. Much like your dance around my main point, this didn't solve the problem, as the person still couldn't pay back the loan.

You can expect more than 70 out of 100 people, will pay back a low risk loan, and I'm being generous here. So you set the interest rate to cover the 30 people that would potentially default. As a result, the bank makes money, and the people have houses, and the system works. Enter corporate greed and "subprime" loans. Here you are only expecting a few people to pay back to the loan, so now you have to jack up interest, which in turn decreases the amount of people able to pay back the loan, so you have to jack up interest again, which in turn decreases the amount of people able to pay back the loan...

You don't have to be fucking Einstein to figure out that the system fails. I don't know why so many people didn't see it. It's simple, elementary school logic. "If Johnny's allowance is $10 a month, you don't lend $100 to Johnny, and expect $120 back the next month!" If this is the stuff for "Nobel Laureates" - damn - your opinion of the human race is quite low. It's simple logic. Nothing complex. But if people realize that anyone can figure this shit out, what would we need the bankers for?

My proposal is simple: first, it prevents you from making a commission off of a failed loan. When you fail, you shouldn't be paid for said failure. No "liberals", you don't get points for trying, welcome to the real world. Second, it places tough regulations on lending, thus preventing another crisis. Part of my second proposal is being done, but it's not enough. Even after the government and lenders fuck up, they still demonstrate very little will to fix the system, which is yet another great reason for the protests.

Has anyone noticed that people can't make up their mind on whether Obama's advisor team is full of academics with no real world experience or revolving door financiers from wall street? People need to pick a cliché talking point and stick to it.

Considering that the protesters come from a wide range of backgrounds, common sense would dictate that they would have a wide range of differing opinions, and expecting them to pick a cliche is rather silly. They're protesters, not politicians.

[Tubbsalot]

It's simple logic. Nothing complex.

Not that I've bothered to fully read your post, but if you think there's 'nothing complex' about the financial crisis, then I'd suggest you might not understand the financial crisis.

Just eat and drink and you stay alive. Nothing complex about biochemistry!

[Distruzio]

A sad reality.

Why Americans let lobbyists buy their government for so many years I will never know.

Wow.

I have no idea where you're from, but I'm getting the "condescending European" vibe.

Spain, and he is right. Without a doubt.

[Distruzio]

There are alternatives, TA.

If not from a corporation then where are they to get those things?

It just seems like a bunch of disaffected entitled middle class folks demanding the promises made during the 90's come true. Seems like a bunch of folks yelling "I'm angry," and "I want shit!" I grow instantly suspicious of such initiatives. It isn't that I'm not angry as well, I'm just not going to go to the hand that slaughters me to ask for more.

Not everyone there is a spoiled brat.
EDIT: See this.
http://www.youtube.com/watch?v=tFz1VVXsWRU

I love him.

[Mr Bananagrabber]

If not from a corporation then where are they to get those things?

Not everyone there is a spoiled brat.
EDIT: See this.
http://www.youtube.com/watch?v=tFz1VVXsWRU

I love him.

http://krugman.blogs.nytimes.com/2011/10/10/if-banks-are-outlawed-only-outlaws-will-have-banks/

Figure I'd throw that in. And before you go "I'm not gonna listen to anything a Keynesian says!", Stephen Williamson also agrees.

[Andaluciae]

I love him.

http://krugman.blogs.nytimes.com/2011/10/10/if-banks-are-outlawed-only-outlaws-will-have-banks/

Figure I'd throw that in. And before you go "I'm not gonna listen to anything a Keynesian says!", Stephen Williamson also agrees.

God, I love reading Krugman when he puts on his economics professor cap. He's such a understated, yet simultaneously overwhelmingly forceful arguer that its like looking at a piece of artwork. That's when he's at his best, and his best is pretty much better than anybody's.

[Zephie]

My one gripe with the monetary system is my wealth can be robbed from me without anyone physically stealing my wallet or going into my bank account, because each printed dollar without value devalues each of my dollars. Back in the days of the 13 colonies, counterfeiting money was punishable by death.

I think people need to be even more outraged. I'm sure all of you would be pissed off if someone stole your wallet and ran off, but we don't see anything actually happening. This is how they get us, by gradually doing things, so we don't notice them.

[Andaluciae]

My one gripe with the monetary system is my wealth can be robbed from me without anyone physically stealing my wallet or going into my bank account, because each printed dollar without value devalues each of my dollars. Back in the days of the 13 colonies, counterfeiting money was punishable by death.

I think people need to be even more outraged. I'm sure all of you would be pissed off if someone stole your wallet and ran off, but we don't see anything actually happening. This is how they get us, by gradually doing things, so we don't notice them.

Under any monetary system inflation is unavoidable--even previous metals backed currency. After the boom in silver from the Americas, Spain was unable to pay her troops in the Netherlands because they wouldn't accept silver that had become, essentially, valueless.

[Cosmopoles]

Not that I've bothered to fully read your post, but if you think there's 'nothing complex' about the financial crisis, then I'd suggest you might not understand the financial crisis.

Just eat and drink and you stay alive. Nothing complex about biochemistry!

In fact, if the crisis were simple it wouldn't have been a crisis - most of the problems would have been experienced by mortgage lenders rather than investment banks, bigger banks could have absorbed the bad loans and it would be largely contained within the US.

[Mr Bananagrabber]

My one gripe with the monetary system is my wealth can be robbed from me without anyone physically stealing my wallet or going into my bank account, because each printed dollar without value devalues each of my dollars. Back in the days of the 13 colonies, counterfeiting money was punishable by death.

I think people need to be even more outraged. I'm sure all of you would be pissed off if someone stole your wallet and ran off, but we don't see anything actually happening. This is how they get us, by gradually doing things, so we don't notice them.

So buy inflation-protected bonds. Under normal circumstances people don't just allow their savings to be eroded by inflation. Obviously they're going to demand a premium to be compensated for their decreased buying power, and borrowers will give it to them because inflation makes the real burden of their debt decrease.

[Keronians]

My one gripe with the monetary system is my wealth can be robbed from me without anyone physically stealing my wallet or going into my bank account, because each printed dollar without value devalues each of my dollars. Back in the days of the 13 colonies, counterfeiting money was punishable by death.

I think people need to be even more outraged. I'm sure all of you would be pissed off if someone stole your wallet and ran off, but we don't see anything actually happening. This is how they get us, by gradually doing things, so we don't notice them.

So buy inflation-protected bonds. Under normal circumstances people don't just allow their savings to be eroded by inflation. Obviously they're going to demand a premium to be compensated for their decreased buying power, and borrowers will give it to them because inflation makes the real burden of their debt decrease.

Also, governments tend to immediately act in the face of high inflation, so...

Low inflation is preferable over stagflation and deflation, so we go with low inflation.

Deflation benefits creditors, so he doesn't have much to complain about. Well, if there's high deflation, then he does, but not to do with the security of his investment.

[Terra Agora]

If not from a corporation then where are they to get those things?

Not everyone there is a spoiled brat.
EDIT: See this.
http://www.youtube.com/watch?v=tFz1VVXsWRU

I love him.

I like him but he fails to realize the problem isn't fractional reserve.

[F1-Insanity]

I can almost list the major experts who predicted the crisis on my hand, you're going to have trouble finding anyone else other than Baker, Roubini, Schiller (and it’s not like people even cared about Roubini, before the crisis he was just a regular economics professor consistently prophesying doom and consistently being wrong about it, until now) and a few other financial experts and traders who actually prophesised the crisis – because I cannot stress this enough, the vast majority of experts in finance and economics, especially including those not tied to any business or corporation, failed to identify the bubble.

They failed to identify the housing bubble (which still exist, fwiw), as much as most of them failed to identify the stock bubble, the Enron scam, the Madoff fraud etc... I think this has to do with that the financial-economic sector is quite a lot about confidence, or rather 'make-believe' as I call it. In cases such as this real estate thing, so many people were initially profiting from the bubble, that it became their prime interest to keep believing in it. Sort of how socalled 'success' breeds more 'success' until the whole shabang blows up of course.

Most banks seemed to think that real estate prices would continue to rise for decades, and I’m not talking about your typical trader/analyst here, I’m talking about quants with PHD’S IN PHYSICS (http://plus.maths.org/content/how-maths ... n-brothers ) thinking this. And many many experts not employed by any bank did not think there was a housing bubble either, and they had an array of technical reasons to think the movement in house prices represented something fundamental (e.g. land becoming more scarce).

Kinda shows you how smart those guys were, eh? Completely detached from reality. Can happen to people who spend all day analyzing with computer models, and forget there's a real world out there (I admit, I sometimes forget that too). However, I did decide not to buy a house a few years ago, turns out to have been a good decision. Friend of mine saw this whole thing coming and talked me out of it, I think I owe him one.

In fact, we’re not absolutely sure it is even possible to identify a bubble UNTIL after the bubble has burst for a number of technical reasons (for instance, the argument that if it was ‘obviously’ overvalued, everyone would have already shorted the asset to make a profit causing it to return to an equilibrium price), this is the sort of thing nobel laureates in economics debate over, it can get very complicated, I would not expect any trader or analyst to have special knowledge on this issue compared to non-banker academics. Of course I’m not letting bankers off the hook, there was a lot of fraud and lousy data/record collection that made the value of many mortgage backed securities completely ambiguous.

I am still baffled as to why investors kept buying those securitized ('packaged together') mortgages without knowing the real value. And also, a simple rule that I learned from my parents is that a chain is only as strong as its weakest link, but the rating agencies always seemed to value those securitized mortgage bundles according to the strongest link. I believe that the idea that 'housing prices cannot go down' became some sort of religious belief with many of them, even if deep down some of them knew better. The bad news is, the housing prices are still about 15% above the long term trend line (on average, wildly varying from region to region).

Fix it, they cannot.

[Shofercia]

It's simple logic. Nothing complex.

Not that I've bothered to fully read your post, but if you think there's 'nothing complex' about the financial crisis, then I'd suggest you might not understand the financial crisis.

Just eat and drink and you stay alive. Nothing complex about biochemistry!

First, that's a very poor comparison, as biochemistry is much harder than finance. Second, I'd recommend you actually reading my post, before "gloriously" quoting it out of context. Here's the full quote:

You don't have to be fucking Einstein to figure out that the system fails. I don't know why so many people didn't see it. It's simple, elementary school logic. "If Johnny's allowance is $10 a month, you don't lend $100 to Johnny, and expect $120 back the next month!" If this is the stuff for "Nobel Laureates" - damn - your opinion of the human race is quite low. It's simple logic. Nothing complex. But if people realize that anyone can figure this shit out, what would we need the bankers for?

If you can't understand that lending Johnny $100, when his monthly allowance is $10, and expecting him to pay back $120 the next month won't work - then I recommend that you review basic math. I learned this in grade school. Is Russian education that superior to wherever you go? Cause we learned this shit in first grade.

Similarly, if you lend $100 million to a many more "Johnnys" and expect to get $120 million within a month - it won't work. Hence the system is broken. You are either dense, or pretending to be, if you don't get this. It's also interesting that you're attacking me, instead of attacking my argument.

Me: "The system is broken, because the banks lent a bunch of money to people who couldn't pay it back, and couldn't even be reasonably expected to pay it back. It's what started the crisis!"
Response: "You clearly don't understand the financial system, it's much more complex, a bunch of so-called experts couldn't have predicted it, blah, blah, blah".

I've yet to see a post that takes issue with my core argument, but they're all quite wonderful at dancing around the argument, hoping to cover it up. Here's the argument:

Although no bank can know that person will pay back the loan, it's fairly easy for a bank to understand that a person with $100,000 yearly income can generally pay back a $500,000 loan, whereas a person with $25,000 yearly income cannot. You don't need to be an expert, in order to follow common sense...You can expect more than 70 out of 100 people, will pay back a low risk loan, and I'm being generous here. So you set the interest rate to cover the 30 people that would potentially default. As a result, the bank makes money, and the people have houses, and the system works. Enter corporate greed and "subprime" loans. Here you are only expecting a few people to pay back to the loan, so now you have to jack up interest, which in turn decreases the amount of people able to pay back the loan, so you have to jack up interest again, which in turn decreases the amount of people able to pay back the loan...I don't know why so many people didn't see it. It's simple, elementary school logic. "If Johnny's allowance is $10 a month, you don't lend $100 to Johnny, and expect $120 back the next month!" If this is the stuff for "Nobel Laureates" - damn - your opinion of the human race is quite low. It's simple logic. Nothing complex.

[Distruzio]

I love him.

I like him but he fails to realize the problem isn't fractional reserve.

True enough. But his answers would go a long way towards actually addressing some of the problems and inhibiting the growth of others in the country.

[Hydesland]

First, that's a very poor comparison, as biochemistry is much harder than finance.

Actually no, human systems have many more variables and is much less predictable than any molecular system, and physicists agree: http://www.perimeterinstitute.ca/News/H ... very_hard/ since human beings are very unpredictable people.

I don't know why so many people didn't see it. It's simple, elementary school logic. "If Johnny's allowance is $10 a month, you don't lend $100 to Johnny, and expect $120 back the next month!" If this is the stuff for "Nobel Laureates" - damn - your opinion of the human race is quite low. It's simple logic. Nothing complex. But if people realize that anyone can figure this shit out, what would we need the bankers for?

The problem is that your diagnosis of the problem is utterly wrong and you apparently don't actually know the kind of activities the banks actually got up to, instead you're presenting a gross oversimplification. The very fact that you're seemingly entirely ignoring the existence of collateral makes your argument insane. In fact, investment banks do not actually ever directly loan money to home-owners, ever.

[Distruzio]

I love him.

http://krugman.blogs.nytimes.com/2011/10/10/if-banks-are-outlawed-only-outlaws-will-have-banks/

Figure I'd throw that in. And before you go "I'm not gonna listen to anything a Keynesian says!", Stephen Williamson also agrees.

Very interesting! Who knew Keynes' stooge had any sense --- owait. He doesn't. That anti-fractional reserve issue is the ONE thing I can actually agree with the Protesters about beyond the sheer anger they feel. Krugman is a louse. Really, I'd get more use from his comments were they printed on toilet paper.

[Terra Agora]

I like him but he fails to realize the problem isn't fractional reserve.

True enough. But his answers would go a long way towards actually addressing some of the problems and inhibiting the growth of others in the country.

That's the part I like, haha.

[Hydesland]

He doesn't. That anti-fractional reserve issue is the ONE thing I can actually agree with the Protesters about beyond the sheer anger they feel.

I cannot think of anyone that knows even the slightest bit about finance and banking, isn't a communist or isn't a lunatic, that thinks full reserve banking is practical, desirable, or even meaningful (or even non contradictory). It removes the very purpose of banks, financial intermediation, it is an extremely extremely extremely anti free market position to be entirely anti financial intermediation, it only makes sense if you're a communist or central planner.

[Terra Agora]

He doesn't. That anti-fractional reserve issue is the ONE thing I can actually agree with the Protesters about beyond the sheer anger they feel.

I cannot think of anyone that knows even the slightest bit about finance and banking, isn't a communist or isn't a lunatic, that thinks full reserve banking is practical, desirable, or even meaningful (or even non contradictory). It removes the very purpose of banks, financial intermediation, it is an extremely extremely extremely anti free market position to be entirely anti financial intermediation, it only makes sense if you're a communist or central planner.

Indeed, though I wouldn't put it that blunt. :/

[Hydesland]

Indeed, though I wouldn't put it that blunt. :/

I wouldn't normally either, but the point was that it's not like Krugman is the only one that thinks that, I was emphasising that it is absolutely not something only New Keynesians think.

[Shofercia]

I don't know why so many people didn't see it. It's simple, elementary school logic. "If Johnny's allowance is $10 a month, you don't lend $100 to Johnny, and expect $120 back the next month!" If this is the stuff for "Nobel Laureates" - damn - your opinion of the human race is quite low. It's simple logic. Nothing complex. But if people realize that anyone can figure this shit out, what would we need the bankers for?

The problem is that your diagnosis of the problem is utterly wrong and you apparently don't actually know the kind of activities the banks actually got up to, instead you're presenting a gross oversimplification. The very fact that you're seemingly entirely ignoring the existence of collateral makes your argument insane. In fact, investment banks do not actually ever directly loan money to home-owners, ever.

Another personal attack. Lovely. Is that all that you pro-bank people are capable of? Personal attacks on those that dare to point that sometimes banking is common sense?

In some cases, the banks use the houses are collateral. When the bank gives you a home loan, if you don't pay it back - bank gets back the house. The problem is that the housing bubble burst, and as a result, some people owned more money than the house was actually worth. In these cases, even if the bank repossesses the house, there is still money, that the bank lent, that's not covered by collateral.

The housing bubble was also predictable, here's an article speculating about a possible collapse:

http://www.mortgagenewsdaily.com/432006 ... ctions.asp

There is so much conflicting information out there about "The Bubble." Does it exist? Will it leak? Will it burst? The money men are busy analyzing the effect on the GNP, consumer confidence, and other economic measures. Mortgage lenders are concerned (although they continue to lend at record levels and with little apparent worry about some of their riskier credit policies) about eventual losses if homeowners are forced to default on their debt.

Usually, when a ship captain encounters uncertain peril in the water, he slows down the ship, and investigates. The captains of the figurative lending ship - flat out didn't give a shit, and continued to lend at record levels, with little apparent worry about some of their riskier credit policies.

And another blog, about the housing bubble:

http://caps.fool.com/blogs/07-housing-b ... rst-/24786

Low interest rate in decades after the tech bubble burst has created the strong housing in US. People of the generation that are used to credit card debts and car loans behave no differently when dealing with the mortgage of their house.

It is not a secret that we are in the housing bubble for years. Just like the stock market bubble, when you sit in a McDonnald for a breakfast and almost all people next to your table are talking about stocks, or even at the barber shop, you know it is time to get out.

When all people believe that the house price can only go up and you see lots of TV programs showing how to buy a old house and flip it then sale for profit, you know the housing great day is about to end.

Up to now, we are still in the process of knowing how bad it is. No one now really know how bad it will turn out to be and how long the housing price depression will last.

And another:

http://realestatecafe.blogs.com/real_es ... will_fall/

August 23, 2006

Kudos to the Boston Herald for asking "Has the Mass. housing bubble burst?" on their front page this morning...The Real Estate Cafe has already mapped nearly 400 sales below assessed value across 27 of the most expensive cities & towns in Greater Boston. In coming days, we'll post another 200 sales to our real estate bubble map including 50 in Greater Boston plus another 150 from Southeastern Massachusetts, primarily on Cape Cod courtesy of RealtyInsite.com.

If there are sales below the assessed value - that's an indicator that the market is inflated, because the market-assessed price is actually higher than the actual price.

So yeah Hydesland, the banks used houses as collateral. The problem? The housing bubble was inflated. Going back to my Johnny hypothetical, now you're lending Johnny $100, and expecting back $120 from Johnny in a month, when Johnny gets his $10 allowance, but you also have a trinket as collateral, that's valued at $120, but its actual value is $60. "Great" collateral. I'm starting to get the feeling that the bankers & friends believe that the middle class are a bunch of idiots, born to be duped.

[Greed and Death]

He doesn't. That anti-fractional reserve issue is the ONE thing I can actually agree with the Protesters about beyond the sheer anger they feel.

I cannot think of anyone that knows even the slightest bit about finance and banking, isn't a communist or isn't a lunatic, that thinks full reserve banking is practical, desirable, or even meaningful (or even non contradictory). It removes the very purpose of banks, financial intermediation, it is an extremely extremely extremely anti free market position to be entirely anti financial intermediation, it only makes sense if you're a communist or central planner.

How about a compromise a 99% reserve required for all deposits.

[Hydesland]

The problem is that the housing bubble burst

Yes, which was my point, investment banks don't loan money to individuals, they have a number of different roles and services on behalf of various businesses. In this case, the concern was making sure their assets was properly valued, which entirely depends only on information (which was concealed often, making the value of assets ambiguous and the level of risk underestimated) and housing prices not suddenly suffering a sharp decline, which is what I said originally, which confirms my original post.

The housing bubble was also predictable, here's an article speculating about a possible collapse:

Some people were lucky with their predictions, the vast majority were not. Look, there's something you seem to be missing about bubbles. The very definition of a bubble is that people are incorrectly predicting the value of an asset, the term "obvious bubble" is technically a literal oxymoron. If the bubble was obvious, it wouldn't be a bubble, because everyone would instantaneously change their evaluation of the asset until the price of such returns to an equilibrium level. Bubbles arise because of a lack of information about the underlying asset. Well, there are some theories to the contrary, but it gets very complicated and is where complicated subjects like behavioural finance comes in so that such an oxymoron can be theoretically reconciled. See where I'm going with this?

There is so much conflicting information out there about "The Bubble.

Your source seems to again be confirming what I was saying, conflicting information, no consensus. But actually, this was in 2006, by then a number of banks were actually already aware that housing was overvalued and some people were panicking and there was not much they could have done about it, leading to a crisis in 2007. For you to have a point, the bubble should have been predicted a lot earlier, in fact right after the dot com bubble, and only a very small handful of people got it right then.

http://caps.fool.com/blogs/07-housing-b ... rst-/24786

07? Even later, missing the point even more, by then the bubble had actually already burst, it just wasn't reflected in the data yet. Also, this guy sounds like an Austrian, they've been predicting a bubble whenever money is loose continuously since the school was created a century ago, the fact that they got this prediction right means nothing, there was no technical analysis, just an idealogical belief about low interest rates always causing bubbles.

Furthermore, quoting individuals is meaningless, I never said that nobody said there was a bubble. For every asset being traded currently, you will always be able to find some people claiming it to be a bubble, the fact that some people did it (and still do) with housing does not provide any useful information at all.

[Shofercia]

Once again, my main argument is this: money was lent to people who couldn't pay back the money, i.e. if you make $20,000 a year, you can't pay back a $200,000 loan, and the housing bubble, which as you pointed out, was about to burst, was used as collateral. It doesn't take Einstein to predict that the system will fail if this is done. Duh! You've done a masterful dance around it yet again.

But actually, this was in 2006, by then a number of banks were actually already aware that housing was overvalued and some people were panicking and there was not much they could have done about it, leading to a crisis in 2007. For you to have a point, the bubble should have been predicted a lot earlier, in fact right after the dot com bubble, and only a very small handful of people got it right then.

If the banks were aware of the housing bubble, why the fuck were they using houses as collateral on high risk loans? That's my point. Congratulations, you've defeated a side point that I've made, and proved my main point to be correct. Well done!

As for "not much could be done about it" - umm yeah there was. How about not using overvalued housing as collateral on high risk loans?