Krugman and his buddies are part of the problem.

Plenty of economists knew what was coming, but the collective socialist economic media denounced anyone who dared to claim the bubble wouldn't last forever.

http://www.youtube.com/watch?v=zdVP_sgCETo

http://www.youtube.com/watch?v=PDJjXOxsArA

Here is a fun quote from 2003:

Despite the
long-term damage to the economy inflicted by the government's
interference in the housing market, the government's policy of
diverting capital to other uses creates a short-term boom in housing.
Like all artificially-created bubbles, the boom in housing prices
cannot last forever. When housing prices fall, homeowners will
experience difficulty as their equity is wiped out. Furthermore,
the holders of the mortgage debt will also have a loss. These
losses will be greater than they would have otherwise been had
government policy not actively encouraged over-investment in housing.
http://www.lewrockwell.com/paul/paul128.html
All of these people have one thing in common, they're from the Austrian School of Economics:
http://en.wikipedia.org/wiki/Austrian_Economics

Almost everyone with a basic knowledge of economics knew the housing bubble was going to burst. It's quite obvious when stock prices depart significantly from reality. The thing is predicting when the bubble will burst (and, to be fair, the severity of the inevitable crash) - no one wants to get off the ride to be left behind while everyone else makes a killing, but likewise no one wants to be on the ride when it crashes. Some people, for political reasons, are trying to spread the myth that only their preferred school of economic thought predicted the crash, and that now that it has happened they are vindicated. Hell, maybe they even believe it themselves. I just hope that those people ignorant enough to believe that we'd eliminated boom and bust in the first place don't latch on to this instead.

There were even more economists predicting a crash and they weren't all part of the Austrian School.

The point is, only a small fraction even had any idea about the upcoming mess. Economics is a young but not a very definitive science -- ask the same question to 10 economists and get 20 different answers. There wouldn't be so many different and potentially successful economic systems if the answers were always clear. Still, many thought they had it all worked out by now despite history suggesting otherwise.

What I find especially amusing is how those so-called experts try to predict the future again and act like their field never had any worries.

Some people, for political reasons, are trying to spread the myth that
only their preferred school of economic thought predicted the crash

Bull ******* ****, you find me the Keynesian who said this was going to happen.

To be fair, not even Misesians, Hayekians, or Freidmans predicted the housing bubble accurate, much less the severity of it.

What I posted was from 2003, this seems pretty ******* accurate.


Despite the long-term damage to the economy inflicted by the government's

interference in the housing market, the government's policy of

diverting capital to other uses creates a short-term boom in housing.


Like all artificially-created bubbles, the boom in housing prices

cannot last forever. When housing prices fall, homeowners will

experience difficulty as their equity is wiped out.

Furthermore, the holders of the mortgage debt will also have a loss. These

losses will be greater than they would have otherwise been had

government policy not actively encouraged over-investment in housing.