Touché! Although if you are referring to the the great housing bubble, I think a big contributing factor was financial instruments and practices which enabled m

Touché! Although if you are referring to the the great housing bubble, I think a big contributing factor was financial instruments and practices which enabled more "bubbly" behavior. Giving people access to mortgages that historically would likely not have been given, and in hindsight absolutely should not have been given, injected a ton of cheap and easy money into the system. The more degrees of indirection, the more unhinged it can become. Concrete to abstract: - make a house yourself - buy a house with cash - buy a house with a mortgage with a large down payment (low risk, easy to back) - buy a house with good credit and less down payment but PPI (riskier, the bank needs to hedge more) - no down payment, less than stellar credit, more house than you need, etc. The latter is super high risk and normally would not be underwritten. But someone figured out you could bundle the risk in order to distribute that risk, surely only a collapse of the whole housing market could make them massively default! Oops.