tag:blogger.com,1999:blog-7905515.post8709129371644633610..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Russ Roberts Interviews Joe NoceraEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7905515.post-56427974005547610002010-12-20T15:20:04.482-06:002010-12-20T15:20:04.482-06:00I love the bit at the end where Nocera laments tha...I love the bit at the end where Nocera laments that housing is entirely dependent on the federal govt., and that needs to change. While he just wrote a polemic against the Republicans on the FCIC for essentially pointing out the same thing.Patrick R. Sullivannoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-76759937217067292932010-12-20T15:06:48.188-06:002010-12-20T15:06:48.188-06:00Robert: People believed it because prices had not,...Robert: People believed it because prices had not, historically, ever fallen nationally in nominal terms since data had been collected. That's not a good reason, but I think it is the main reason. Now, lots of AAA stuff is based on this kind of reasoning, and historically,AAA stuff has a very low default rate, so it's not insane. With hindsight, clearly the underlying risk of the obligors changed materially ,with lots of no-money-down, no doc loans, but that wasn't obvious if you weren't in the business. Moody's actually stated that it wasn't their job to look at that information, a statement they regretted. <br /><br />A lot of lending crises were based on bad assumptions about collateral--the internet, the commercial real-estate circa 1990, oil lending in the 1980's. I know old regulators who say this is perennial, so perhaps there's a large cost to assuming otherwise in the boomEric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-64518697384704133302010-12-20T14:36:47.346-06:002010-12-20T14:36:47.346-06:00Of course this means the 'rational actor' ...Of course this means the 'rational actor' hypothesis is bunk. Lot's of people have said so, but this crystallizes down to one particular irrational belief.<br /><br />Why would people believe that housing prices couldn't drop precipitously? Are prices really hard to determine objectively? No stable long term relationship exists between wages and housing prices, for example?<br /><br />And if THAT'S true, then how DO you make rational lending and investing decisions? I'm really asking.Anonymoushttps://www.blogger.com/profile/05431036725490947171noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-3125171169565835602010-12-20T14:21:27.669-06:002010-12-20T14:21:27.669-06:00People do learn from experience, unfortunately the...People do learn from experience, unfortunately the learning is too specific. The lesson we've collectively learned from the housing bubble is "housing bubbles can occur" - not "bubbles of any kind can occur".Anonymousnoreply@blogger.com