Housing Bubble and Current Bust Are Not Unique--We Have Been Here Before
Letter to the Editor

Resident Fellow Alex J. Pollock
Resident Fellow
Alex J. Pollock
Sir, Katrina vanden Heuvel (Letters, March 31) quotes Nicholas von Hoffman, following the purchase of Bear Stearns, that "we are in unknown territory facing situations that have never arisen before."

Well, no. In fact, our most recent housing bubble and current bust display all the classic patterns of recurring credit over-expansions and their painful aftermaths, as colourfully described by Walter Bagehot, Charles Kindleberger and Hyman Minsky. These include a funding panic, government interventions, the fall of the previously esteemed, the search for the guilty, and the inevitable political over-reactions.

In booms it is proclaimed that we are in a "new era"--in busts that we have "unprecedented problems". This is merely the egocentricity of the present. It can be corrected, although it usually isn't, by observing the patterns of financial history. As James Grant said in Money of the Mind: "Progress is cumulative in science and engineering, but cyclical in finance." The tendency of financial markets to have to relearn the same lessons about once a decade is one of the most intriguing things about them.

Alex J. Pollock is resident fellow at AEI.

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Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

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Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

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Speaker of the House John Boehner on resetting America’s economic foundation

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Reforming Medicare: What does the public think?

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