The large banks, of course, knew that real estate prices would keep rising, since they control the money supply through their control of the Federal Reserve System. Lower the rates, give everyone a loan, and let the market spread the newly-created inflationary wealth around.

Then, raise the rates, watch as homeowners were unable to stop foreclosure because their home values dropped, and simply take back all the of the real estate. In this way, banks now own vast amounts of real estate throughout the country that was purchased at severe discounts through county foreclosure auctions.

The hedge funds who were willingly complicit in the scheme? Well, they got a free bailout of their toxic collateralized debt obligations. A few people lost jobs, homeowners and consumers lost wealth in their pensions and retirement accounts, but the offending companies were able to use that inflated money to keep operating with no real consequences. A free market would have punished such awful lending and investing decisions, but the semi-government intervention saved the funds from having to make good decisions in the future.

So, maybe I was wrong: the banks learned the lessons of these other market collapses all too well. Instead of wiping away the wealth of investors in the internet industry, or certain energy companies, or foreign bond markets, the lenders decided that the newest target would be more massive than any before. The homeowners of America who purchased or refinanced within the last seven years are now all caught in the trap of getting a loan on an extremely over-valued property, and many owe more than the house is worth.

The real estate value is gone. For many foreclosure victims, the house is gone. And even rents are increasing in many parts of the country, at a time when job quality is deteriorating and food and transportation costs are rising.

So now, we should ask ourselves, what will be the next bubble to burst? And who will be the unfortunate victims?

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