The late great housing bubble ponzi scheme: Ah, it all seems so obvious now, doesn't it?

The housing crash will in the end be the biggest economic story of the past 200 years. We'll be studying this thing for the rest of our lives. Then future generations will pick up the ball and study and dissect it even more.

Here's Kunstler's take, which to me reads like a history book written five years from now. Very insightful read:

The basic insanity of a system that presumes vastly increased wealth where none will occur, has led to further distortions in finance. The most obvious one is the so-called housing bubble.

The misplaced extreme expectation in the ever-increasing value of paper wealth, led to the hijacking of mortgages by financial playas who bundled them into odd lots of tradable debt (promises to pay) and used them to leverage abstruse bets (hedges) on the behavior of other kinds of paper markers (currencies, interest rate differentials, commodity prices) -- very profitably as long as all playas believed that industrial societies that run all oil would continue to grow, to produce more wealth.

The level of abstraction in these rackets -- their distance from the reality of productive activity --is self-evident. But they were so successful that the profligate creation of ever more mortgages became an increasingly reckless and irresponsible enterprise.

Contracts were made with house-buyers who had no record of credit worthiness and often no real proof of income. Contracts were made on terms (interest payments) that were deceptive, even ruinously false, for the house-buyers.

The reckless reassignment of lending risk into ever more abstract layers of deferred obligation, and the ease of credit that ensued, allowed millions of ordinary people to acquire real property on unrealistic terms, which had the affect of bidding up the price of houses that these owners will eventually have to surrender for nonpayment.

That process is now underway.

The reckless creation of mortgages had the further effect of stealing demand for house-building from the future. So many new houses were built and then sold to people who will probably have to surrender them, and then so many more beyond that were built in the expectation and hope that reckless mortgage creation would continue forever, that there is now a massive over-supply of total existing houses while the pool of suckers for new ruinous mortgages has shrunk to zero.

Here's a graph that says it all:

Here's a chart of the US median new home price for the past five years (thanks to HP'er WB). A picture is worth a 1000 words, and this is the one the NAR and REIC don't want you to see...