More on the bubble

Over at the Housing Panic blog, Keith has an outstanding and sobering post:

· The upswing usually starts with an opportunity - new markets, new technologies or some dramatic political change - and investors looking for good returns.

(collaterized loans, 1% interest rates, globalization)

· It proceeds through the euphoria of rising prices, particularly of assets, while an expansion of credit inflates the bubble.

(Hey, my house just went up 20%! Masses quit their jobs to get realtor licenses. Neighbors talk about prices at cocktail parties)

· In the manic phase, investors scramble to get out of money and into illiquid things such as stocks, commodities, real estate or tulip bulbs: 'a larger and larger group of people seeks to become rich without a real understanding of the processes involved'.

Read the whole thing.