"It seems we have developed a speculative culture"

Given the advantage of the passage of time, historians will surely note that one of the less appreciated long-term effects of the Greenspan term at the Fed was the impact on the American culture. Few are able or willing to make this association today (and certainly no one can prove it) but a link certainly exists, at least to some extent.

Things are now changing rather dramatically (and certainly for the better), but up until the housing boom went bust a year or two ago, we were a nation overflowing with leveraged speculators and everyone seemed OK with that whole idea.

Why not? What's wrong with everyone getting rich?

You'll probably never read in the history books that European Central Bank President Jean-Claude Trichet "looked the other way" or was somehow negligent in his duties when he mumbled about something (e.g., "froth") when maybe he should have used his bully pulpit or regulatory power to discourage bad behavior (e.g., poor lending practices) that would surely, in the long-run, end badly (e.g., the bursting of the largest asset bubble in the history of mankind).

But in America, it was clearly different.

So when you read a comment like the one made by Robert Shiller the other day, you have to wonder if it was a throw-away line or if there was a darker meaning intended, more than what most people would ever read into it.

When talking about the current "housing slump" (aren't we beyond that sort of characterization yet?) Dr. Shiller noted that there's a good chance home prices will fall more than the 30 percent decline experienced during the Great Depression.

Then he commented:

Basically we’re in uncharted territory. It seems we have developed a speculative culture about housing that never existed on a national basis before.

You could have said the same thing about stocks in 2001.

Equities, however, weren't quite inclusive enough. After the turn of the century, those who didn't know the difference between Cisco Systems and Pets.com seemed more than willing to take the plunge on something they did understand - real estate.

This sort of thing doesn't just happen by itself. It takes an entire society changing the way they think to get an asset bubble as big as the one we had in real estate.

Real estate was (and always should be) a place to live - not an ATM machine or a retirement plan. If you work hard enough, you should be able to make a living buying houses and fixing them up or if you have good connections in the local community and plenty of "positive mental attitude", it's reasonable to expect that you could make a decent living as a realtor.

You have to wonder where we go from here now that the culture has been completely transformed - everyone expects another bubble.