In response to:

Bubbles and Fire

scott s. Wrote: Mar 30, 2013 4:29 PM
Hopefully you will look at why the federal funds rate hit its bottom in 2003 and the fed started tightening, but the bubble didn't really take off until after that reaching a peak in 2007.
scott s. Wrote: Mar 30, 2013 4:35 PM
My guess is that the players in the housing market had grown accustomed to the level of volume / cash flow / profits in 2000-2003 and as the fed started tightening, market participants had to become more creative to maintain volume, which they did at least in part by increasing non-conventional lending. I think there were a number of factors which made non-conventional lending attractive, of which the CRA (that many conservatives like to point to as the "cause" for political/philosophical purposes ) was not a big factor (but certainly not a non-factor).

As all fans of the Discovery Channel's Mythbusters know, it takes three things to make a fire: fuel, oxidizer and a spark. If you combine these three things in the right proportions, you too can make a fire.

Economic bubbles work much the same way.

Let's start by considering the circumstances that launched the first U.S. housing bubble back in 2001. Here, the leading role of "fuel" will be played by the Federal Reserve's policy regarding interest rates. The role of "oxidizer" will be represented by a number of factors that are always present in the...