Quick Test: Can you spot the financial crisis?

Here’s a map of housing prices in the US.

See if you can draw a circle around the financial crisis.  (Most people get this wrong).

Can you spot the financial crisis?

Can you spot the financial crisis?

 

If you placed your circle starting at around 2006 and ending at around 2008, you got the answer wrong.   Those years do not represent a “crisis” of any kind.  Those years represent a healthy correction back to the mean.

(Actually, they represent an artificially aborted correction, saved by radical monetary policies  by the Federal Reserve.  The dip in housing prices should most likely have gone much lower.)

Where was the real crisis?

The mainstream media consistently fails to identify crises at their roots, and instead focuses on the painful effects of the crisis, rather than the crisis itself, which was the unnatural rise in prices which deviated from organic growth.

The correct answer to the above test is here:

therealcrisis

If you circled the period from 2006 to 2008, you got the answer wrong.

 

 Now here’s another test:

Given that markets are at their all time highs, is there another financial crisis coming?  Or are we in the middle of one?

 

Calling the downturns "crises" is missing the bigger picture.

Calling the downturns “crises” is missing the bigger picture.

And when one looks at market performance in aggregate since 1960, it’s quite clear that the “crisis” is not the market’s attempt to return to sanity, but the (now 3) attempts at lift-off into the stratosphere.

 

  • NotQuant

    If you answered 1996 to 2006, that’s also an acceptable answer. The starting point for the real-estate bubble is typically identified as turn-of-the-century where the results of the dot-com bust were papered over by credit creation. But it is also arguable that the dot-com boom and the housing boom are part of one extended “crisis”.

  • Mike

    If you answered “After 1913″, you have the correct answer.