WHAT Was the Bubble?

A lot of people have pointed at real estate & housing as the current bubble that we see bursting.

While I have intimated at the REAL bubble that is currently causing us headaches Mark Steyn points is out explicitly:

Washington is engaged in the doomed project of attempting to re-inflate a credit bubble. Can't be done. But, in attempting it, they're massively expanding government spending and further distorting the rules of the market in the same ways that worked out so well for American home owners. And, as Iain noted below, the one group of people economic illiterates like Barney Frank don't seem to mind screwing over are the lenders - the investor class.

So why would you invest right now? From the point of view of investors in mortgage-backed securities, the "Hope for Homeowners" plan boils down to a government-mandated unilateral rewrite of the terms of your investment. It's different in degree from, say, investing in a copper mine in Africa and then finding that this week's president-for-life is going to nationalize without compensation. But it's not so different in principle. And, if you're an investor, what you have to ponder is whether the "Hope for Homeowners, Change for Mortgage Lenders" approach might soon spread to other areas of economic activity. Right now, that seems a safe assumption.

Source: The Corner — South and souther (Mark Steyn)
This by far is the best sum up of our current economic problem.

I find it interesting, money to fuel credit is supposedly in short supply and what is being done? The Federal Government is pursuing policies to keep rates low. Thank God inflation and energy prices are low at the moment. If we had either one we would be in a serious world of economic hurt.

Wow, that last paragraph is very frightening. The government coming and rewriting agreements, that is like Nikki Santorro (from the movie Casino played by Joe Pessci) strong-arming his banker because the investment plan they agreed to did not work out.