This is why it has been essentially impossible to buy a house lately (well, up to 2008) if you have any intention of not being foreclosed upon. It would seem t

This is why it has been essentially impossible to buy a house lately (well, up to 2008) if you have any intention of not being foreclosed upon. It would seem that the market has a way of righting itself over time. The people who would take out loans and drive the prices up eventually run out of credit (it's a financial capacitor, not a perpetual money source), and then they not only have to compete on the higher priced market they created -- they have the burden of the additional interest, as well. They then can not even buy as much as before and are relatively disadvantaged in the market -- pushing prices back down, perhaps even below the origin. This is more or less playing out in the housing market right now -- home prices : income ratios are returning to their post-WW2 origin. As far as the other points, I feel there are too many counfounding issues (particularly with the warring nations example) to really comment on.