There may be an article on Slate or I saw it on another site that provides a good explanation why these seemingly irrational boom and busts are quite rational and in the long run helpful.

The gist of the idea is that over-investment does occur in some good when it is hot with a resulting over-supply. When the bust occurs, some people are hurt, but the overall economy gets the benefit of built out infrastructure that otherwise would not exist unless the over-investment occurred.

The example in the article was railroads. Millions were invested in building railroads in the 19th century. Overbuilding occurred and some investors lost money. But, the railroads that were built were left behind, revalued, resold, and run at lower cost because the overhead value was lower.

So, with houses, there's a case that something similar is happening. There was overlending to allow people to buy houses. Some people are not able to pay the loans back and the financial markets have to correct. But there are a number of good things.

1. Many of the borrowers are able to service their loans so those folks get to own houses and build equity, the building block of middle class life. If the lending had not gotten looser, these folks would not have gotten loans at all. So, the majority of borrowers are benefiting. The lending is something a populist should support because otherwise only wealthier people could ever get loans and build equity.

2. Houses do revalue down and people who held their assets back or could not afford houses during the boom can now buy up the houses are lower rates and put them to productive use at a lower cost basis. Again, a populist effect.

So, volatility in pricing whether it be stocks or other assets provides a benefit. A straight-line growth curve in prices would squeeze a lot of people out of the market. Government control of markets results in very low private investment rates which means primarily the rich benefit because they already have their money and can play the influence game with government officials.

Markets work.

Your pollyanna view of life is perfectly timed with record bankruptcies and record foreclosures being dealt out to middle and lower class America; not investors. Maybe, you should learn a little about the difference between a business cycle and interest rate cycles of central banks. Business boom/bust was 1800's. In the 1900's our economy was yanked from that cycle and placed on the expansion/contraction usury cycle of a central bank. Catch up with the last 100 years and then post on this again and tell me why you think all these bankruptcies and foreclosures are healthy.