Strangely selective criticisms of monetary policy

David Beckworth has a nice piece today pushing back against the idea that Fed open market operations monetize the national debt.

Here's one graph from that post that should push us even further against so many common ideas about recent monetary policy:

If this graph is the only thing I showed you about a country's economy, and I asked you, "At what point would you guess that this country had a liquidity crisis, a banking panic, and a subsequent deep negative shock in nominal incomes?"  would there be any doubt about what date you would pick?  Shouldn't that be the easiest argument you could imagine?  If you then found out that this particular country did have a large economic dislocation at exactly the point where the central bank's share of securities suddenly dropped by half, wouldn't you assume that a sharp deflationary monetary policy was at the center of the crisis?  Wouldn't you discount any other explanation unless it was backed by a large body of indisputable facts?

Projecting instability

Ben Bernanke has been talking about his new book, and he was recently on the Diane Rehm Show (HT: ThomasH ).  I thought his answer to one question was telling:

Transcript

• 11:29:44

  REHMIt's remarkable that you said that the recent financial crisis was the worst in human history, even worse than the Great Depression. But that's where I think an awful lot of people wonder, if it was so big, why didn't you see it coming and why couldn't you have done something to stop it before it happened?

• 11:30:18

  BERNANKEWell, again, we were aware of the fact that house prices were very high. And we thought it quite possible that they would correct at some point. By 2006, 2007, we also were aware of the problems in the subprime lending market. What we did not anticipate and no one anticipated was the vulnerability of the financial system overall to a run, a panic.

This is sort of the last domino to drop in the logical steps that happen once you question the housing bubble narrative.  What if there wasn't a bubble?  What if home prices and returns were roughly in line with substitute investments?  The series of realizations that must follow affirmative answers to those questions ends with the conclusion that we really had to take a hammer to our own heads in order to get to a place where home prices collapsed.  With each passing month of newly accelerating home prices and rents across the country back toward equilibrium levels with a barely functioning mortgage market, this realization becomes stronger.

But, notice how Bernanke talks about houses in 2006 and 2007.  And, I really don't need to single him out.  This is the consensus view.  First, he says that house prices were very high.  Is that what the Fed is supposed to do?  Are they supposed to manage the prices of financial securities and real assets?

Then he says, "And we thought it quite possible that they would correct at some point."  Correct.  The price collapse was a correction.  An adjustment to something more appropriate.  The solution to a problem.  They were "aware of the problems in the subprime lending market."

Very few subprime loans were issued after 2Q 2007.  Home prices were still near their peak in 2Q 2007, and were just beginning to collapse.  By early August 2007, Jim Cramer was screaming on CNBC, begging for some liquidity.  The panic happened before the collapse.  When Cramer lost it, homes were only 4% off the peak, but they were falling by about 1% per month.

There was a panic, but the Fed did little to stop it, because home values falling by 1% per month was "correct".  So, did homes need to correct, and we were surprised that it led to a bank panic?  Or, were homes priced reasonably, and our financial system was operating carefully enough that it took a banking panic to pull home prices down?

I don't mean to be hard on Bernanke, either.  If the Fed had acted to stop the banking panic and home prices had stabilized or risen, he would have been pilloried.  Even after waiting more than a year to stabilize the economy, when the "financial crisis was the worst in human history, even worse than the Great Depression", the most vocal complaints were about being too friendly to the banks.

September 2015 CPI Inflation

Here are updates on Core CPI inflation and Shelter CPI inflation.  Trends continue.  Shelter inflation continues to increase above 3% YOY and Core minus Shelter inflation continues to move along at about 1% YOY.  Some of the drop in energy prices might have filtered into core inflation, but we can see here that Core minus Shelter inflation was only at 1.35% when oil began to drop, and Core minus Shelter inflation hadn't been above that level since early 2013.

This week, expectations of a Fed rate hike have moved back from the December meeting toward the March meeting.  That would be helpful, given that outside of the rent inflation caused by the housing supply depression inflation continues to be at a 50 year low.

Some of the developments that might lead to more housing supply may also lead to higher spending in general, so that positive developments in housing supply may be temporarily associated with both high home price appreciation and high rent inflation.  I think that eventually, accommodative monetary, regulatory, or credit policies would each lead to declining rent and home price appreciation.  But, the potential lag, and a general lack of appreciation of this problem will make policy and prices going forward an interesting show, with several possible paths.

In the meantime, considering the decade long depression-level behavior of housing starts, calls for monetary contraction because of inflation that is largely the product of rising rents are indefensible.

Potentially good monetary news

There have been some dovish signals the last few days from Fed officials.  This could be great news.  It would have been even more effective to signal more dovish intentions long ago, and to pull back when necessary.  Instead they have tended to be hawkish before shifting to dovish positions as the consequences of their hawkish stance have become apparent.  This is certainly a lot better than being hawkish and remaining so, in light of the evidence.  And it may be the best we can expect, given so many hawkish views among traders, economists, and the broader public.

Bond markets seem to be reacting as I would expect, with short term rates falling and long term rates holding firm.  I would expect some positive response from equities, which isn't apparent today.

This sort of context is where I see potential trading gains among homebuilders, because the idea that home values and housing expansion is a product of mortgage rates and the demand that low rates encourage is highly overestimated, in my opinion.  The growth in housing will come from general monetary expansion, including more non-credit demand and the continuing accumulation of positive home equity.  Mortgage availability is a constraint, but that constraint has little to do with rates or demand.  This may cause bullishness among homebuilders to be less forward-looking than it should be.

If the Fed can sit on their hands for just a little while, and natural rates can get above the target rate, we might be able to get a regime shift where the status quo would be accommodative instead of constraining,  where the Fed could be seen as hawkish by following natural rates up, when in fact they might be neutral or dovish.  That would be a welcomed change of pace.

Housing, A Series: Part 68 - Bias in Home Price Indexes confirms the local supply constraint problem.

In the previous two posts, I have proposed that we can see the effect of persistent rent inflation on home prices by noticing that Price/Rent ratios are higher in cities that have experienced more rent inflation.  The expectation of continued rent inflation, from local supply constrictions, causes Price/Rent ratios in those locations to rise.  I'd like to look at that a little more here.

First, there is the issue that the Price/Rent ratio estimated by the S&P/Case-Shiller National Home Price Index and CPI rent inflation has tended to rise above the Price/Rent ratio estimated with aggregate numbers from the BEA and the Federal Reserve of owner-occupied real estate values and owner-occupier imputed rents.  I have attributed this drift to supply constrictions.  Price/Rent levels are higher in the constricted cities, so new building must happen where supplies aren't constricted.  Where supplies aren't constricted, prices are lower, so the changing composition of housing must cause indexes tracking individual properties to have an upward bias compared to indexes that track all properties.

In fact, this is one factor that Zillow intended to correct with their price index (ZHVI).  And, in fact, the S&P/Case-Shiller National Home Price Index deviates from the ZHVI at about the same scale as it deviates from the price levels estimated by the BEA & Fed data.  This confirms that rising prices are coming from a supply issue.  If rising prices in the cities where housing is in high demand were caused by demand, then marginal new building would be happening in those high priced areas, and the S&P/Case-Shiller Index would be biased downward, because the ZHVI would be populated by new higher priced homes.

This is a core confusion about what is happening in the housing market and the economy in general.  From an unbiased observers perspective, a market with rising prices due to rising demand looks just like a market with rising prices due to constricted supply.  In both cases, the market will be increasingly dominated by buyers willing to pay the higher price.  We are predisposed to attributing cause to high income buyers.  But, in fact, this data indicates that we have constricted supply, and that, on the margin, households are escaping rising home prices by building homes in less expensive locations.

The same pattern shows up in the difference between S&P/Case-Shiller home prices and the average price of both existing and new homes during the boom period.  Average new home prices and the S&P/Case-Shiller index moved together for decades.  If anything, the average price of new homes grew at a slightly higher rate at times.  But, starting in the late 1990s, the new pattern emerged, and new home prices started rising at a slower rate than existing homes.

This is one of many deceiving issues on this topic.  One could interpret this to mean that banks were pushing subprime loans on low income households, and that would explain the lower value of new homes.  But, despite this widespread belief, there was no shift to lower incomes among home owners during that period.

The divergence between the prices of new and existing homes after the bust is because we have reduced access to mortgage credit for middle income households, so that more new homes are being built by higher income households, and this is creating a countereffect against the flight from high priced cities.

Housing, A Series: Part 67 - Better Numbers for City Rent Inflation

I have used numbers from Zillow that estimate absolute price/rent ratios for each metro area, which gives me a better estimate of home prices and expected rent inflation in each city.  I have updated the numbers from yesterday's post here.  I have used Zillow's home value data for each metro area to establish relative Price/Rent ratios in 2014 for each city.  Then I have used my BEA, Financial Accounts of the USA, and Case-Shiller data to complete the time series.

As I suspected, pegging the Price/Rent ratios to equal values in 1995 did cause home prices to be overstated in the low cost cities and understated in the high cost cities.  Even with that data, the four largest cities (identified as light blue dots in the scatterplots) lined up pretty well on the 45 degree line between actual rent inflation and expected rent inflation needed to justify market home prices.  This adjustment pulls the other cities more in line with a 1:1 relationship.

To review the last post, the 125% increase in home prices from 1995 to 2005 can roughly be divided into three causes. (1) higher intrinsic values of homes because lower long term real interest rates increase the present value of future rent payments and (2) higher prices simply due to the excess rent inflation over that 10 year period, which was significantly higher than non-shelter inflation.  This leaves the source of only about 30% of home price gains unidentified.  I have argued that this can be attributed mostly or completely to the persistence of rent inflation, which creates a growth  factor in the intrinsic value of home ownership.  In aggregate national data, this appears to bear out.  The rent inflation needed to justify home prices appears to be close to the amount of rent inflation that persists.

To confirm this idea, I have compared the actual rent inflation since 1995 with the rent inflation required to justify home prices in each individual city.  There is a lot of noise here, because home prices will be based on long term expectations, and short term local rent inflation can fluctuate significantly.  But, generally the cities with higher rent inflation have seen a similar rise in rent expectations, because our supply problems are regulatory in nature and persistent.  So, rational expectations appear to be the cause for most of that last 30% of home values at the height of the boom, leaving little or none of the boom remaining to be explained by credit expansion, monetary accommodation, or speculative overreach.

The return of high rent inflation while home prices remain well below the levels that demand this level of rent inflation means that there is an unprecedented amount of policy space available for real interest rates to rise in an expanding economy, while building and home prices both rise substantially.  There is ample room, and great need, for all of these things to happen.  Keep in mind that nationally, rent inflation is again running at more than 1% above core CPI inflation, so as we move past the crisis period without a homebuilding response, the dots in the second scatterplot will drift to the right.  Rent inflation expectations now should be higher than recent actual rent inflation.

Wouldn't it be a wonderful problem to have if a decade from now, we have disruptive levels of rent deflation in Silicon Valley, which really do lead to massive capital losses for real estate owners?  I daydream of a country that could make that happen, and that would allow 4% inflation for a few years while that did happen, in order to help prevent defaults and failures among those real estate owners without calling stability a bailout.  Millions of additional young idealists could move there and join in the technological renaissance that produces so many good things for all of us.  Let's teach those builders and speculators a lesson in boom and bust cycles.  Let's let them build!  Let's see what happens when there is a market supply response!

The city charts updated with the new required rent inflation data are below the fold.  As before, expectations were not out of line in any of the high cost cities.  And, with this new data, the anomaly that made low cost cities appear to be the only places with unrealistic rent inflation expectations, has disappeared.  With Price/Rents adjusted down, housing markets in Detroit and Cleveland now appear to be reasonably pessimistic.
 

Housing, A Series: Part 66 - Our Two Part Housing Bust, City by City

Note:  I am including a lot of detail here, which some readers may prefer to skip.  Below the fold, I present the results of the analysis.

I have been looking at aggregate home prices as if homes are a sort of inflation protected bond.  Rent (or imputed rent) is what we spend to consume housing, as a service.  Home ownership can (should) be seen as a financial security, where the cash flows are the perpetual rents on the property, less expenses.  The sharp distinction between home ownership and housing consumption is widely dismissed, usually because ownership itself is seen as having value.  This value means that most households who are able to own capture extensive surplus from ownership, so that price seems to be non-constraining.  I'm afraid that this notion that housing prices aren't efficient is a significant factor feeding public distrust of housing markets and the idea that speculators can push prices up to inappropriate levels without triggering a selling response.

But, this is not that different from most other securities.  There are some owners on the margin.  And, in fact, in the aggregate, home prices appear to follow non-arbitrage price relationships with other fixed income securities over time.  Home prices can be modeled by a simple fixed income model, such as this one:

Normally, the assumption is that house prices and rents will rise with general inflation levels, because higher rents will encourage new supply.  This should be correct.  The growth rate should be zero.  And the fact that home prices have recently risen at a much higher rate than general inflation is taken as a sign of a "bubble".  Strangely, as I have pointed out, vocal proponents of the "bubble" narrative have ignored the fact that there has been persistently high rent inflation, mostly coming from regulatory constraints in our major cities.  The bust has been taken as an inevitable result of the effect of new supply on rent.  But, the continuation of rent inflation, especially in our major cities, undercuts that explanation.  In fact, there never was a strong supply response, and there is no strong supply response coming in the problem cities.  The "bubble" was actually from a supply bust and the bust was from a demand bust that we created because we wrongly interpreted our supply problem as a demand problem.

This is why the Price/Rent ratio rose more using the Case-Shiller 10 City index (which includes the cities with the worst supply constraints) than it did in the national index.  And the Case-Shiller National Index rose higher than a measure using rent income and home values from the BEA and the Federal Reserve.  I think this is because the higher Price/Rent ratios in the major cities is a product of the persistent rent inflation (a growth rate in our equation above) which is due to regulatory supply constraints.  The only places we can build are the places with lower Price/Rent ratios.  Case-Shiller tracks the values of individual homes very well, but since marginal new homes must be homes with lower prices, Case-Shiller is a biased measure of the value of the home of the typical household.

So, there might be a growth rate informing home prices, and that growth rate would be the expected rate of rent inflation.  Here is a more detailed version of our valuation model, in nominal terms.  As a first step, here, I am using the rate on 30 year mortgages as a proxy for the discount rate.  It includes the real rate, the inflation expectation, and the real estate risk premium.  Here I am using CPI shelter inflation as a proxy for the growth rate, which we can think of as representing general inflation plus expected rent inflation in excess of that.  BEA table 7.12 gives us a measure of rent on all owner-occupied real estate, after expenses, and the Federal Reserve's Financial Accounts of the US gives us a measure of the total value of all owner-occupied real estate, which I use as a proxy for Home Price.

We can solve the equation above for the growth rate by using our measures of net rent, home prices, and discount rate.  We can call that the aggregate expected rate of forward rent inflation at any point in time.  Then we can compare that to actual shelter inflation to see how closely expectations adhere to experience.

The problem is that the mortgage rate itself is a position on future inflation.  In the 1970s, this was the dominant factor.  So, mostly what we see here is that homeowners with a fixed rate mortgage saw sharp gains from 1975 to 1980, then saw sharp losses from 1981 to 1990.  But, these gains and losses were largely a product of their short mortgage position in nominal terms.  If we look at the later period where inflation was relatively stable, we see that the expected growth rate of rent cash flows is fairly stable, and follows the actual rate of rent cash flow growth pretty closely.  There was not a sudden period in the 2000s where home buyers were depending on 5% or 10% rent growth.  This is true even if we use Case-Shiller or FHFA home price indexes as our home price proxies.

Fortunately, for this analysis, our current supply problems seem to date to the mid 1990s, and we have some market measures of real discount rates that we can use for this period, so we can cancel out the expected general inflation measures in our denominator, and use a real valuation measure which is more fitting for a real asset like a house.

This is going to get long, and I'm going to dump a lot of graphs here, so the rest is below the fold.

***ADDED NOTE: I found better data to estimate city Price/Rent ratios with in the next post.  So, some of the analysis below remains true, but the better data gives a slightly sharper result.

September 2015 Employment

Here are a few of the graphs I tend to check on with the monthly employment report.

Durations look good.  Very long term unemployment continues to slowly decline.  And, while insured unemployment has leveled out (at very low levels), there still appears to be a slight downward trend in shorter duration unemployment.  In durations, we see that last month looked like there was an aberration in very short durations that pushed the unemployment rate down.  Even with that aberration correcting back up this month, there was a decent decline in the unemployment rate this month that was hidden by rounding.

In flows, everything still generally looks good, like a well-running expansion.  The one point of concern is the sharp drop in flows from Not-in-Labor-Force to Employed.  This is why there was a drop in labor force participation.  This sort of sharp drop isn't unheard of, and could correct next month.  But, it is definitely something to keep our eyes on.  Especially with the Federal Reserve persistently erring on the hawkish side, if we proceed with a rate hike and subsequent months confirm this drop in flows into employment, this would be an important early indicator that a shift from expansion to contraction was taking place.

It would be completely unnecessary, and I hope we can avoid it.  It looks to me like we are entering a late expansion phase, similar to the late 1990s, and with inflation as low as it is, there really isn't a reason for us to be afraid of monetarily supporting as long of an expansion as we can muster.

Both the net NtoE and net UtoE flows are now on the margin of being uncomfortable.  If the weighted average NtoE (green line above) flow remains under -0.1% and the UtoE flow falls below 0.15%, these would be flow behaviors associated with a coming contraction, especially if they coincide with contractionary Fed policy and a flattening yield curve.

Today's bond reaction to the employment report is not as optimistic as it first appears

At first glance, today's movement in bond markets along with the buoyancy of equities looks like one of those instances where an indicator that the Fed keys off of is enough of a negative surprise that the positive trigger of monetary offset overwhelms the negative information.  This would not be the case if the Fed wasn't persistently positioned outside the range of optimal policy.  It is only the case because monetary policy is tight enough that loosening will benefit the real economy.

In any case, on closer inspection, I don't think the bond markets did react today with an expectation of a delayed rate hike.  In my Eurodollar futures indicator, the expected date of liftoff didn't change a single day today.  It was January 2 at the beginning of the day and it was still January 2 at the end of the day.  What changed was an increase of uncertainty about the date of the first hike and a sharp decline in the expected rate of hikes once they begin.  This is now all the way down to only 50 basis points per year.  That is very flat.  I don't think the yield curve has been this flat since the crisis.  It's a new low.

I think this is more evidence that the current natural rate is not appreciably above zero, and any rate hike is expected to reverse fairly quickly.

But, why would equities rise?  My best guess is that the lack of wage gains gives hope that the downward pressure we have seen on profits over the past couple of years will lighten up.  I'm not completely satisfied with that answer.  This is not the only indicator that is beginning to show early signs of potential cyclical peaks in equity and labor markets, so if bond markets don't expect a Fed reaction here, I would think that recession fears would dominate.

On the other hand, far forward rates only fell a few basis points today and have held fairly steady, albeit low, for most of the year.  So, maybe markets expect the Fed to stick to its current plan for the first rate hike and then to be extremely careful about doing anything else after that.  Is it possible that we can thread the needle and continue down a path of very low inflation without triggering a liquidity problem?  Or, is the buoyancy of the far forward rates due to the asymmetrical effect of uncertainty at the zero lower bound, and what we are seeing is something close to a flat yield curve with ZLB distortions?

Housing, A Series: Part 65 - Reasoning from a Daisy Chain

Following up on Tuesday's post, I would like to think through a sort of narrative of the housing boom.  First, I want to think of a benchmark, where some reasonable amount of housing is available in places like San Francisco.  We might imagine a marginal change in our economy when a bright young computer whiz graduates from the Ivy League and moves west to participate in the tech revolution.  He finds a small 1,500 sq. ft. apartment renting for $1,500 per month in a shiny new high rise in San Francisco proper that has a 10% vacancy rate.  A few years later, we all benefit from his skill and hard work when we download his new app.  He becomes very wealthy.  And, in the meantime, a builder collects those $1,500 rent checks as a normal return on the capital she used to build the high rise.  That's pretty much the extent of the economic effect of our computer whiz's quest.

Now, let's make only one change in that story - a change that describes our world more accurately.  Let's take away that shiny new high rise with a 10% vacancy rate.  That is the only change.  Here, incidentally, is a graph showing (1) the portion of US employees living in the  New York City, San Francisco, or San Jose MSA's and (2) the rate of single unit housing starts.  This is the core of the story of the housing "bubble".  These are the cities with the highest incomes and the most dynamic economic sectors in the country, and the housing boom was facilitating a migration away from them.  This must be a rare story in the history of human migration.  We have found a way to cause people to flee prosperity.



Source

In our more accurate story, our whiz has trouble finding an apartment, but finally finds an old 1,000 sq. ft. apartment for $4,000 per month.  The apartment had been renting for $3,500, but demand for space had been so strong that the landlord raised rents to $4,000.  This was the last straw for the couple who lived in it.  At $3,500, rent was taking half their paychecks already, and they simply couldn't make it work any more.

The couple had been looking at their options, and even though it would mean a 20% cut in wages for jobs similar to what they had in San Francisco, they decided that life in Phoenix would end up being more affordable.  In Phoenix they could move into a spacious 2,500 sq. ft. home for less rent than their little apartment had fetched.  In fact, it was so affordable, they could qualify for a mortgage to buy that spacious home.  And, so they did.

One simple change - one home built in Phoenix instead of San Francisco.  And, the result is a litany of statistical information that describes the 2000s:

1) We still get the app, and the whiz still gets his fortune, although his real income (along with everyone else, as measured) is lower because of rent inflation.  So, there is stagnation in real incomes, though that isn't as much of a concern to our whiz as it is to the custodians and school teachers who, unlike our couple, are still hanging on in San Francisco.

2) There is no new landlord earning a market return on a shiny new high rise.  Instead, there is an old landlord who keeps earning higher and higher returns on her old building as rents rise.  She is still earning a market return, but that return is based on capital gains on the old building that now earns $4,000 rent instead of earning $1,000 on four apartments in the new high rise.  Since computer whizzes keep moving in, it seems that rent increases will continue as long as anyone can tell, so since our landlord foresees more gains in the future, she has raised the selling price of her old building even faster than she has raised the rents.

3) Our couple sees their nominal income fall even though their actual standard of living has increased.  In aggregate statistical measures, though, their move reduces the average real income because their move has a negative effect on nominal income but no significant effect on inflation.  Our whiz created an effect on inflation by bidding up the price of housing in San Francisco.  But, Phoenix encourages new home building, so there is no rent inflation from the new house in Phoenix.  It affects neither the Case-Shiller index of home prices nor the CPI rent level.  And, now they are in debt.

This one simple change - a lack of housing in the places where people would like to live - leads to more debt, more homeowners, more residential investment because of the larger home in Phoenix, lower nominal incomes, lower measured real incomes, higher capital incomes, higher home prices on average, level nominal spending on housing (rent) and falling real spending on housing.

Note the irony that the only character who is clearly worse off in our new version of the story is our computer whiz, who must now spend more of the very high profits he earns from his app on rent.  Off-stage, there are also many low income residents of San Francisco who are much worse off in the second version of our story.

Statistically, this paints a story of stagnant real wages, over-investment in homes, over-indebtedness, and workers who are losing negotiating power and claiming less of the national income.  In the nuts and bolts of our story, though, all of those statistical facts are either not true or are unimportant.

The thing is, we all know these characters.  This is not a contrived tale.  And, the funny thing about this story, which, as we can see, contains all the same familiar people with all the same motivations, but is simply missing a well-placed apartment building, is that to these characters, the narrative is completely different.

The factual narrative is simple: deprivation.  We have deprived ourselves of a unit of housing.  The whiz kid sees it as a deprivation story.  He sees a frustrating sort of entrance fee on the road to his American dream - a large down payment he has to make to break into an innovative industry - a cost that would be difficult if he doesn't happen to come from a wealthy family.  Although, he probably earns some extra income as a result of the barrier to entry that the missing apartment creates into his industry.

The landlord and the couple see a bunch of tech workers coming in and throwing their weight around, bidding up rents.  The couple see these tech workers forcing their friends out of their neighborhoods and undermining their community.  They see excess and wealth ruining the fabric of their town.  They also see a greedy landlord who keeps ratcheting up their cost of living and simply pocketing unearned profits, putting them on an endless treadmill of working harder and harder just to maintain their standard of living.

Their new neighbors in Phoenix see more of that California money piling in, funding one new neighborhood of McMansions after another.  And, everyone else watching this unfold sees greedy banks piling up mortgages on their balance sheets for families that somehow can go from 1,000 sq. ft. renters to 2,500 sq. ft. owners and all those statistics about stagnation and over-investment.

And they all look at this simple picture of avoidable deprivation and they see unsustainable excess and greed.  I say they are deceived both by their own experiences and by the seemingly obvious statistical measures that confirm it.  And, so we are engaged in an ongoing process of engaging the effect of supply deprivation and solving it by imposing demand deprivation.  When we are left with an economy that seems only capable of bubbles or busts, we naturally blame the folks that seem to be holding all the cards - the bankers, the landlord, and the whiz kid.  The rich just keep getting richer.  "Stop the lending, stop the building, tax the whiz kid.  If we do let you build apartments in San Francisco, you can sure as heck bet that we're going to try to stop you from building apartments for people like him.  And, for Pete's sake, stop printing all that money.  Can't you see it's driving up the price of everything and just lining the pockets of capitalists?"

“Tell me,” the great twentieth-century philosopher Ludwig Wittgenstein once asked a friend, “why do people always say it was natural for man to assume that the sun went around the Earth rather than that the Earth was rotating?” His friend replied, “Well, obviously because it just looks as though the Sun is going around the Earth.” Wittgenstein responded, “Well, what would it have looked like if it had looked as though the Earth was rotating?”