''During my lifetime, I have been through two great depressions. The first was the Big Bank Smash of 1893. The second was the Great Depression of 1929-32 ... after both there were pledges that they could never happen again.
... the events leading up to [both] were so similar ... First came the Great Boom ... The State debt appeared to have no limits ... But biggest of all was the Land Boom. It was a new kind of gold fever ... Everyone wanted to own land. There were fabulous stories of fortunes made buying and selling land.
At the same time, builders were pushing up all kinds of structures ... Fancy prices were obtained for these dwellings from home-hungry families. So prices went up and up.
To finance these land sales and building projects, a large number of building societies were established ... The societies worried little about costs or valuations. They had the money to lend, and out it went. The private banks found themselves in competition with these societies, so joined in the mad scramble to provide accommodation.
Borrowers didn't worry much about their prospects of paying back the loans. They believed that the Boom was bound to last.
Boom, Borrow and Bust ... First a number of the Land and Finance companies failed. Depositors lost their money, and those building homes were unable to complete them.
Of course there were the usual promises that the banking system would be reformed.''

Jack Lang - "Memoirs"; excrpted from

http://business.smh.com.au/business/wan ... tml?page=4

"....property is not exactly a consumption good, nor a capital investment, nor a producer good, or simply an asset.

It is a hybrid of all four, and not surprisingly, its market functions differently to any of them individually. Its supply and demand works more like that for asset markets than for consumer, producer or capital goods markets. In these latter markets, as prices rise, an increase in supply brings about price normalisation and thereafter a real long-term price reduction.

In property markets, when prices rise, so does supply. Prices do not fall to some equilibrium point where demand meets supply because the market has nothing to with supply and demand. On even a moderately rising market, the whole concept of equilibrium is not only irrelevant, but counter to what is going on. People are profiting from a perceptual shortage induced by an extraordinarily high degree of trading, as in a bull market in stocks.

Once the bull market is set in reverse, it takes a creative mind to see how it can be stalled. Everything collapses, including the huge trade credit regime threading through the construction supply chain...."

article is titled "Wanted , a new economic theory" which may or may not have a certain resonance in these difficult times.