Housing Bubble About to Burst. Economy Prepares for Soap in the Eye

With housing prices at record highs, economists around the country are watching the housing bubble waiting for what they see as the inevitable burst. What impact will a popped housing bubble have on the economy? No one knows, but there are a lot of questions. For example: What sound will the pop make? Will we get soap in our eyes? Why can’t we catch the bubble in our hands without it popping?

Answers to these questions are important in determining the effect it will have on the economy. Will the pop be loud and sudden or will it gradually deflate and merely whine like a leaking balloon? What if the bubble floats up too high for us to grab? Is there some sort of house bubble making machine? What if the bubble pops in our mouths? Will it taste bad?

“I’m not going to buy a house if it’s just going to burst later,” said the Smiths, a young couple in the market for a house in Seattle. “We keep hearing about this bubble and we’re worried. Can this bubble be reblown like bubble gum or will it pop into nothing like a soap bubble. Alan Greenspan isn’t answering these questions and it has us worried. I think we'll get an apartment. Those aren't going to pop are they?”

"The housing bubble is a mysterious unknown," says David Crenshaw an economist at Harvard. "I've done extensive research on this phenomena by blowing bubbles in my bathtub. I blew big bubbles and small bubbles. None impacted the economy whatsoever. So my impression is that there is absolutely nothing to worry about."