You're supposed to raise your standard of living by working harder, being clever, earning more income -- not by using your long-term savings. And now this current generation is pretty much fucked. When push comes to shove and they go to take money out of their houses at retirement time, they’re going to find out that there ain’t a whole lot there. They better pray that Social Security is still around in 20 years -– not exactly a sure thing.

There is the other shoe. I hadn't considered that. These people won't be able to retire! Millions of them, across the social strata. They'll have a huge house and a BMW and no retirement savings. They'll all be depending on Social Security at exactly the moment when Social Security becomes insolvent.

This essay makes another interesting point:

But you look at what FEMA did after Katrina, and you wonder, "Who’s running the ship?" This disaster is more of the same -- only it is much, much worse than New Orleans.

We saw a complete abdication of responsibility by the regulatory supervisors who oversee banking and lending institutions.

Basically, we've got more incompetent Bush Administration appointees. This is beginning, for me, to be a core reason why I don't think I'll be able to vote for McCain no matter what I think of his policy positions vis-a-vis the Democratic nominee -- its still the Republican party, and the Republican party appears to be completely infested with rubes who can't do their jobs. This keeps coming up in context after context. Unfortunately, only Hillary seems to have made an issue out of it, and ironically so as she is perceived as being part of the culture of corruption too.

Barry "Big Picture" Ritholtz:

How on Earth was a strawberry-picker in California making $15,000 a year able to qualify for a no money down loan on a $720,000 mortgage? That is just unconscionable.

Housing prices might not fall all at once, though -- they can just go sideways for twelve years and that's the inflation-adjusted equivalent of a 20 percent drop.

It was so obvious it was going to fall apart eventually. What is so amazing is how long it took to actually happen.

From James Suroweicki in early November:

The havoc on Wall Street following the collapse of the subprime-mortgage market boils down to a simple truth: for years, lots of very smart people took lots of very foolish risks, betting borrowed billions on dubious mortgage derivatives, and eventually the odds caught up with them. But behind that simple truth is a more surprising one: the financial whizzes made bad decisions in part because that’s what they were paid to do.

One lesson of the current market chaos, then, is that it’s hard to get incentives right.

From 159 years ago, on incentives:

It hits the poor, not because it wants to hurt them, but to frighten the rich ...

From a Financial Times op-ed by Lawrence Summers, in a popular thread from late November:

Without stronger policy responses than have been observed to date, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond.