Denial of a crisis foretold

Buttonwood has an interesting chronology of the widespread denial that has accompanied the financial crisis. It is worth your time:

Back in 2005 and 2006 received wisdom denied that the rapid growth of subprime mortgages was a problem. American house prices were extremely unlikely to fall at the national level. In any case, the debt had been widely spread among investors thanks to the derivatives market.

Once the subprime woes became obvious optimists still argued that their economic impact would be limited. The banks downplayed the extent of their exposure to subprime lending. As the scale of their exposure was revealed they switched tack to argue that they had a liquidity, rather than a solvency, problem.

When the banks duly had to be bailed out and debt was transferred from the private to the public sector, a further layer of denials was needed. The finances of governments are not like those of individual households, it was said. Governments have the power to tax and to print money, and have recovered from high debt-to-GDP ratios in the past.

The denial continues as we speak. For instance, most bits on punditry on popular media talk about how the housing market has now surely "bottomed out", the very same assessment that has been made for the past 3 years...