The discussion of Paul Willen’s views in “Bubble? What Bubble?” (Ideas, Aug. 5) was timely. Some of his points are reflected in the political principles of the rising national anti-foreclosure movement.
From the beginning of the crisis, we argued that the most important so-called predatory loan was the creation of the housing bubble itself. Millions bought average homes at wildly inflated values. They are now trapped in underwater loans that impede economic recovery.
I would disagree with Willen that nobody seemed to know prices would fall. I think many bank CEOs did expect the crash, and even made money betting on it. They just wanted to get out before the fall.
On the other hand, Willen is right that this was not the product of a few bad actors. It reveals instead how functional these bubbles are to modern-day capitalism. Bank executives, political leaders, regulators — basically the whole system was captured by speculative fever.
But why do bubbles (dot-com, housing, oil, food) seem so prevalent and dangerous today? Our movement argues that an increased gap in income and wealth leads to bubbles. Grass-roots groups such as ours justly criticize that the wealth created by all is flowing to the 1 percent. But this situation also creates a dilemma for the 1 percent. Where do they invest their accumulating capital given that the great majority of incomes are stagnant? Their answer is increased debt and speculation — in other words, bubbles.