And if this bubble was “worse,” that’s for 3 primary reasons:

1) it was BIGGER
2) it was on the heels of another bubble
3) recovery has been sabotaged

Really? Then how come this didn’t occur in the other real estate bubbles that we’ve had in the past several decades? (Read below to grasp your fundamental misunderstanding of the recent derivatives market vs. previous ones.)

You truly misconceive the nature of the problem. The derivative market was invented to serve as a hedge against a housing bubble;

You truly misconceive the difference between a properly crafted hedge and the derivatives that were recently created and misrepresented. You are speaking of things like simple CMOs, but this does not apply here. The complexity of the derivatives created were inexplicable and could not be valued accurately. This wasn’t a hedge. It was a pure snake oil sales job.

if we were to remove even the possibility of the bubble, we would remove the need for a hedge (i.e., the derivative market you hate so much).

Again, not true. The derivatives market I hate so much aren’t basic hedges like CMOs and CDOs, they are instruments made intentionally overly complex and then sold, sold, sold! Brokers falsely told institutions that B-rated debt packaged into a derivative magically became AAA. That’s not a hedge, that’s a revenue generating lie … and the credit rating agencies went right along with it. Had these lies been illegal, we would have had at worst a really bad real estate bubble which we’ve seen and weathered before.

Repeat “8X multiplier” to yourself over and over until you grasp that it was the false valuation of the derivatives that crushed us, and accelerated the real estate bubble way past where it ever went before. And if you don’t believe we shot past previous real estate bubbles, take a look at the Case-Schiller index.

Now, once the derivatives EXISTED, they were regarded almost as insurance. People with insurance act riskier than those without insurance, which explains why they cascaded the ALREADY EXISTING debt problems.

And why were they regarded almost as insurance? Because their value was misstated by the ratings agencies, and there were no regulations that stopped them from doing it. It’s the same as buying insurance from an insurance company that has practically no underwriting, except that it’s illegal to sell that type of insurance. This is really basic regulatory stuff that you don’t seem to get.

It isn’t my fault you fail to grasp that the original sin of the entire thing is money creation, not derivative (i.e., voluntary contract) creation.

And it isn’t my fault that you think every derivative is the same as every other derivative, but it goes a long way in explaining your confusion.

You want to regulate derivatives? Fine, but that alone isn’t going to prevent a huge bubble or the subsequent bust.

Actually, it will. It will prevent a huge DERIVATIVES bubble and the subsequent burst.

In my adult lifetime we’ve had several real estate bubbles, a bio-tech bubble, an internet bubble, a baseball card bubble, a Barbie doll bubble, and on and on. Not one of these caused a historically massive economic collapse. Nope, only this one.

Bubbles will come and bubbles will go, but when a bubble like the derivatives bubble exceeds GDP by 4X then maybe, just maybe, it’s not like any other bubble we’ve ever seen … ya’ think?

And if you want some credibility, you really need to quote facts rather than just producing verbiage without any factual backing.

You truly misconceive the nature of the problem. The derivative market was invented to serve as a hedge against a housing bubble; if we were to remove even the possibility of the bubble, we would remove the need for a hedge (i.e., the derivative market you hate so much).

Now, once the derivatives EXISTED, they were regarded almost as insurance. People with insurance act riskier than those without insurance, which explains why they cascaded the ALREADY EXISTING debt problems.

It isn’t my fault you fail to grasp that the original sin of the entire thing is money creation, not derivative (i.e., voluntary contract) creation. You want to regulate derivatives? Fine, but that alone isn’t going to prevent a huge bubble or the subsequent bust.

Only 100% reserve requirements and commodity money will do that.

Oh great economic sage, since you ignored EVERY other fact I’ve handed you, try explaining how the housing bubble caused an 8X multiplier in the derivatives value rather than the unregulated derivatives market driving a demand for more debt and hence pushing the housing bubble up further. (This should be amusing.)

Funny MONEYcomes from 2 places: Fractional Reserve Banking and the Federal Reserve System.

You cannot get your basic concepts correct, for instance, the difference between money (defined as the most commonly accepted commodity) and paper value. And last time I checked, contracts were perfectly legal forms of trade. So if they were mispriced (i.e., in terms of MONEY) we can blame that on the distortion introduced by the “funny money,” i.e. counterfeiting, and the subsequent credit expansion. The only reason that those derivatives had ANY value is because of the housing bubble, which was caused by credit expansion – that is, the inflation of the money supply, first by the Federal Reserve System, and second by private banks’ practice of fractional reserve banking.

It’s all so technical, isn’t it? Go read a book on economics. Here, let me recommend one:
http://mises.org/resources/681

The Federal Reserve Bank noted that Ginnie Mae began purchasing additional Mortgage Backed Securities (MBS) back in November of 2008. In its fiscal 2009 report to Congress, Ginnie Mae executives boasted, “In FY 2009, Ginnie Mae guaranteed $418.9 billion in MBS [mortgage-backed securities] and its market share of total agency and non-agency MBS was 25 percent, levels not seen since the mid-1990s. In July 2009, Ginnie Mae hit a remarkable milestone of issuing over $46 billion alone, the highest monthly amount in our history.”

Man, buy a frickin’ calendar.

Uh, the fact that you honestly believe that it “provides all the context needed” goes a long way to explaining why you really don’t grasp the concept of cause and effect.

Fannie and Freddie f***ed up royally, but they were burnt by the collapse, they didn’t cause it.

I’m still fascinate by the fact that those clinging so desperately to the “CRA and/or Fannie & Freddie caused the collapse” memes just can’t grasp really, really, really simple math. The derivatives market was “valued” at 8X the debt that it was based upon. Add to that the fact that private lenders ignored all rules and guidelines to create debt to feed the derivatives market, and it’s blatantly simple to grasp that the lack of regulation of the PRIVATE firms to create the conditions that caused the collapse.

Roll that around in your feeble little brain, Willy. $8T in debt was valued at over $60T when converted to derivatives. Are you really so entrenched in your cocoon that you can’t grasp the fact that private industry created over $50T of “funny money”? Really?

Excuse me? Fannie and Freddie are bankrupt. That provides all the context needed. Period.

Is this due to performing loans? No; they are bankrupt because they made bad loans that people could not repay.

“The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history,” Bloomberg explained.”

http://www.thenewamerican.com/index.php/economy/markets-mainmenu-45/3779-fanniefreddie-bailout-may-reach-1-trillion

Yes, I’m impressed. Go stomp your feet some more.