"We too thought our retirement funds and houses were growing miraculously, though ours was an illusion fueled by debt rather than fraud"
This is clearly true regarding housing prices and the returns and market prices of financial companies, but it ignores the effects of productivity increases when applied to other types of companies. Increasing productivity should allow equity capital to produce higher returns and it is difficult to separate this effect from the effect of a leveraged balance sheet when pricing equities. The market will certainly overshoot on the downside at some point but it's difficult to determine where that occurs because consumption must be lower in the short and long term due to deleveraging by businesses and consumers.
This is clearly true regarding housing prices and the returns and market prices of financial companies, but it ignores the effects of productivity increases when applied to other types of companies. Increasing productivity should allow equity capital to produce higher returns and it is difficult to separate this effect from the effect of a leveraged balance sheet when pricing equities. The market will certainly overshoot on the downside at some point but it's difficult to determine where that occurs because consumption must be lower in the short and long term due to deleveraging by businesses and consumers.