It was hard to get people to take the housing bubble seriously in 2002, 2003, 2004, and 2005, but in 2008, even Alan Greenspan is able to see it. So, how can the NYT print a lengthy piece on the explosion of home equity loans without mentioning the role of the bubble. The bubble is central in this story, because if home prices rise 10 percent a year, and are expected to continue to rise for the indefinite future, then it is entirely reasonable for people to borrow against the new wealth created by this appreciation to support their consumption. Unless homeowners listened to that small minority of economists who warned of the bubble (and ignored the pronouncements of Alan Greenspan and other prominent economists), they would been entirely reasonably in consuming based on their housing bubble wealth. This fact should have been mentioned in this article.
--Dean Baker
