re: #57 Killgore Trout

I know there’s a more politicized version of the credit crisis but it’s important to understand the basics. There’s a lot of blame to go around. I thought in the back of my mind that this might cause some trouble because it doesn’t blame liberals enough but it a basic depiction of what really happened.

Well, yes and no. Out here in California, housing prices peaked a few years back (late 2005 I believe). Two phenomena out here mushroomed simultaneously: overbuilding (the stock of houses outstripped what could actually be sold), and the housing prices became so high (well beyond 3x family income) that even those people with good jobs could not afford a down payment of 20% (or even 10%). Southern California has for many many decades had housing prices well above the national average, but the prices got to be so high that the system was beginning to lock like a Sci-fi thriller.

I sold my house on the way up (about 18 months before peak). If I would had waited those 18 months I could have gotten at least $150,000 more for the house (perhaps even more) - that is how “bubbly” the housing market became out here.

Bubble mentality is a well studied and discussed phenomenon. It ends with busts.

So yes, the CDS hustle created its own noose for the bankers, but the horse on which the condemned man was sitting under the tree was a good ol’ bubble that popped.