Bubbles Bubbles Bubbles

Bubbles always have at their heart some big idea, and in this case, obviously, that idea was twofold: housing prices could keep going up indefinitely, and our new instruments for managing risk meant that investing in housing was effectively risk-free. But while this veneration of real estate was central to the bubble, its effects were amplified by specific institutional and cultural factors that led the financial industry to make what amounted, ultimately, to the worst bet in history. In the US, most big financial institutions in effect wagered the value of their entire companies on the housing market. It's when those bets started going bad that the current crisis began.