Leverage this....

This post does a pretty good job, and in acceptable English, in explaining the origin of the shitrain that has fallen on the economy in the last two years. Interestingly enough, the terminology used here can be directly substituted for text like "buying on margin," "margin calls," etc., which were employed 80 years ago, when the stock market collapsed in October 1929 following years of speculation.

The object of our current malaise is real estate, of course, rather than stock certificates. Lots of people assumed it couldn't happen with real estate, because the collapse that resulted in the Great Depression of the 1930's was based on "paper profits" that resulted in worthless stock certificates, and the current imbroglio has tangible material assets behind it. Yep, but there was supposedly "real" assets behind RCA stock in 1929, too, but those assets were impossibly overvalued. Rather like some termite-riddled shack in Southern California being valued at an absurdly inflation million bucks before the bottom fell out this time. Some animated corpse in a suit once said that "An item is worth exactly what someone is willing to pay," or something to that effect.

Up to a certain time, the willingness of people who are ignorant of history, or the context of their own times, or just plain ignorant will persuade them to pay hugely inflated prices for something. Suddenly one morning it all looks like fantasy. Consult the great Dutch tulip bubble of the 17th century; it's only different because the subject was tulips, instead of stocks, real estate, gold, or baseball cards, or the armshells of the Trobriand Islands.

But this will simply recur as long as the human race exists, because it is based on what people want to believe.