Robert Schiller has some interesting evidence that people haven't given up on huge coming profits on buying and selling houses. It confirms that pathetic story about Arizonans bankrupted by house flipping trying to make it back by buying foreclosed houses in the hope of future flips. As Schiller says in his understated way, "At the moment, it appears that the extreme ups and downs of the housing market have turned many Americans into housing speculators. Many people are still playing a leverage game," still hoping they can win by timing the market.
I would only add that people is dumb because a) dumbness used to pay, but also b) they don't have anywhere else to turn. Are they supposed to invest in the green economy? Look for solid annual pay increases by reskilling for a job in the big new American industries that are coming on line? Take heart in the solid new economic strategies pondered in Washington? Trust their retirement to Wal-Mart?
People don't in reality have any of these things to turn to, especially not new economic policy. Bank regulation hasn't happened, and won't, as the foxes still manage the chicken coop, and policymakers, timidly caught by conventiontional deficit worries, are going to tighten money rather than dynamite their way to recovery with a stimulus so big it will actually allow the paying down of the future deficit.
People rely on bubbles because the American economy and its backward leaders still, over 2 years into the surfacing of the crisis in August of 2007, have nothing else to offer them.