When something is overpriced there are always excuses.

I had a friend tell me the other day, with a straight face, that housing is still a great buy because the population will keep growing. Maybe so, but prices are a function of the amount of capital available to buy the goods, not the size of the population. Just because there are a lot of people in Soweto doesn't mean you should plunk down 100 million rand for a shanty.

The housing bubble, in other words, is based on unrealistic expectations. People are taking out interest-only loans, adjustable rate loans, and loans of over 100% of the purchase price, because they expect prices to go up faster than interest rates, indefinitely. True the length of a bubble economy is indefinite, but it definitely bursts in time.

Here's another bubble. Google. Sorry, it's not worth $80 billion. It's worth some multiple of its earnings, and with earnings growing quickly it's worth a premium on that. But it's not worth 25 times its sales of $3.2 billion. No company is. Some part of that valuation, maybe a large part of it, is pure speculation.

The fact that we have both housing and stock bubbles at a time when the economy itself is coasting despite $400 billion in annual government debt should tell us something is going to go boom.

I don't know when. I don't know how. I don't know how bad.

But I do know the law of gravity. What goes up must come down. And what gets pumped full of air must pop.