How does one distinguish between the effects of the popping and appropriate responses to the discovery of inflated valuations?

You're really having a hard time internalizing what I'm saying, don't you?

No, I'm just having a hard time communicating my point to you. If you really think that assets are worth a third less than they were before then I think I'm unable to express what I mean by "economic fundamentals".

The dollar valuation is meaningless except in a relative sense. Whatever REAL assets people have title to, the fundamental value of these assets is not known until they trade them for whatever they consume.

They may not be worth even a third less than before. Many of them may actually be worthless.

The valuation of these assets may have dropped to a third, but the real question is why they were valued at 3X the current valuation.

Austrian theory suggests that the reason these assets were overvalued is because credit expansion by the FED substituted speculative value for real economic growth.

People aren't buying less because they're scared (although I'm sure that has made a dent) – it's because their assets are worth a third of what they were before.

Their assets aren't worth a third less, they just became aware that their assets had been erroneously valued 3X their real worth. They were never worth 3X.

Right… isn't that always the best way to approach assumptions rather than hang too much on any single assumption?

RE: "The bubble popping may have caused a shock to people who thought everything was fine, but the popping of the bubble is not the fundamental problem, not the fundamental issue."

To reiterate, I agree. I have always agreed. Just because I think ABCT, which I know is what you're getting at, is weak doesn't mean I don't agree that the pop itself isn't eveything.

RE: "You seem to be thinking that the conditions that have so far culminated in the bubble popping have been superseded as a problem by the psychological effects of the popping on consumer behavior."

No, no no. It's not a psychological effect – nobody's saying it is – it's a real effect. People aren't buying less because they're scared (although I'm sure that has made a dent) – it's because their assets are worth a third of what they were before. And that REAL drop in consumption reduces job security, which in turn does it's part to reduce consumption of those who had low wages and no assets to begin with, but now also have a reason to cut back because their employers are potentially in trouble.

RE: "Tell me, what is the fundamental economic problem facing U.S. residents?"

Again?!?!?!?! You're really having a hard time internalizing what I'm saying, don't you?

You have a really gray view of the assumptions. Just thought I'd say that.

The bubble popping may have caused a shock to people who thought everything was fine, but the popping of the bubble is not the fundamental problem, not the fundamental issue.

You seem to be thinking that the conditions that have so far culminated in the bubble popping have been superseded as a problem by the psychological effects of the popping on consumer behavior.

This impact is a political problem, not the real economic problem.

Tell me, what is the fundamental economic problem facing U.S. residents?