I studied Economics in college. Why is this important? Well, I feet that we, as individuals, like to complicate things that should not be complicated. We like to confuse ourselves into believing things are more complicated than they really are.
Let’s see what George Mason University professor Peter Boettke says about the housing market and stock market. I am going to pull out some highlights but I suggest you read his post.
I don’t possess a crystal ball, so I cannot forecast the economic future. But I do know that it is not good to expand the monetary base 140% or to run deficits the size we have, or accumulate public debt as we have…
…I also know that the problems we are facing are not “market problems” — it is not that actors are all of a sudden ‘irrational’, and it is not that markets are inherently ‘unstable’. Everything we are seeing in market behavior is a rational response to the environment created by public policy. This is not a psychological problem we are dealing with, it is a public policy problem. Bad public policy produce bad incentives which in turn produce bad results. Ultimately, this is a problem of bad ideas which result in bad public policies.
…Nothing that has gone on so far with the housing market would be unpredictable with a little return to the lessons of Econ 101 about incentives and information, and how markets work to coordinate plans through time via relative price adjustments and profit and loss accounting.
I hope this makes you feel better. : )