THE FINANCIAL MEDIA and government officials are looking for a recovery in the housing market to "restart the economy." The entire world--or at least every exporter from Shanghai to Bonn who is desperately dependent on the free-spending American consumer--is hoping that housing is about to re-ascend to its glorious bubble-era heights. But that is not going to happen--not this year, not even in ten years, for several fundamental reasons. 1. Bubbles do not re-inflate in the asset class that just popped. Tulip-bulb valuations did not rise again to stratospheric heights after the Tulip Craze went bust, nor did the NASDAQ dot-com bubble re-inflate, for the very good reason that bubbles are never based on rational valuations. They are the result of a psychological state of mania that cannot be reinstated once lost.
