The mass insanity of the housing bubble over the last few years has pretty fully revealed itself by now. One need only visit our good friends over at Seattle Bubble to read about the increasing devastation. On Jan. 15, Tim posted the big news: according to the Northwest Multiple Listing Service (NWMLS), King Co. finally posted negative year-over-year median closing prices on housing. According to the same report, active listings are up in the YOY comparison (51%) and pending sales are down (by 33% YOY), both records. In other words, the market is flooded, demand is down, and housing prices are falling.

Were Tim not so nice a guy, we're sure he'd be taking some pleasure in having been right for the last two years or so, during which real estate bloggers derided the Bubble crew and newspaper reporters respected their professional objectivity by indulging in un-critical boosterism, even as the market started its long downward trend (we're looking in your direction, Aubrey Cohen). And with the popping of the bubble, banks are out billions, and the market is threatening to shed trillions of dollars as the markets tumble. Foreclosures are up as credit crunches, flooding the market with real estate no one wants to buy. Recession looms heavily.

It's enough to get one fuming like Thomas Frank (if only we had that much spleen!). As with the dot-com bubble, the failure of government and the unaccountable business interests combined to screw over Americans from coast to coast. And we can hope, Pandora's foolish children that we are, that now, someone will finally put the dampers on, hold someone accountable, and end this insane economic roller-coaster ride that keeps wages low and pours our earnings into investments that up and die on us every few years.

But alas, readers of Harper's this month have been subjected to an all-too-believable prediction of where next our problems lie.

In a long essay (see here for content—unfortunately subscriber only), Eric Janszen, a former venture capital firm manager, lays out a case for the next bubble.

Next? you ask. Of course. There has to be a new one; America's grown fat on imaginary growth on the order of trillions of dollars in securities value. We have to make that up somehow, and actual growth would just plain take too long.

Janszen's essay lays out an accurate but pretty by-the-book explanation of how bubbles arise, and explores the sources of the dot-com and housing bubbles. But his overall argument is distilled to the following:

[T]he industry in any given bubble must support hundreds or thousands of separate firms financed by not billions but trillions of dollars in new securities that Wall Street will create and sell. Like housing in the late 1990s, this sector of the economy must already be formed and growing even as the previous bubble deflates. For those investing in that sector, legislation guaranteeing favorable tax treatment, along with other protections and advantages for investors, should already be in place or under review. Finally, the industry must be popular, its name on the lips of government policymakers and journalists. It should be familiar to those who watch television news or read newspapers.

Janszen doesn't have to hint too awful much to make his prediction painfully apparent to the reader: what's a growth industry at the intersection of public policy, current events, and politics in an election year? Ah yes, alternative energy.

Indeed, the next bubble is already being branded. Wired magazine, returning to its roots in boosterism, put ethanol on the cover of its October 2007 issue, advising its readers to forget oil; NBC had a “Green Week” in November 2007, with themed shows beating away at an ecological message and Al Gore making a guest appearance on the sitcom 30 Rock. [...] The Energy Policy Act of 2005, a massive bill known to morning commuters for extending daylight savings time, contained provisions guaranteeing loans for alternative-energy businesses, including nuclear-power technology. The bill authorizes $200 million annually for clean-coal initiatives, repeals the current 160-acre cap on coal leases, offers subsidies for wind energy and other alternative-energy producers, and promises $50 million annually, over the life of the bill, for a biomass grant program.

We can hear the day-traders (are they even called that anymore?) whipping open their laptops and logging into their Ameritrade accounts. Let the frenzy begin! Republicans embrace biofuels as an excuse to hand out billions of dollars in farm subsidies to agribusiness, just as the WTO gets heavy on us for forcing open markets on the Third World while closing our markets to their food imports (agriculture being a labor intensive industry, they should by rights have a comparative advantage, what with all the cheap labor), by redefining them as a national security issue to secure our independence from foreign oil. Dems do the same thing (Obama has received substantial support for Illinois-based agribusiness) while wrapping themselves in environmentalist flim-flam.

To help facilitate the fiasco, Al Gore has joined a venture capital firm, to advise wealthy clients on where to put all those green investments. Some potential stocks to add to the old portfolio? How about nuclear!

"Loan guarantees for 'innovative technologies' such as advanced nuclear-reactor designs are also at hand," writes Janszen,

a kindler, gentler nuclear industry appears to be imminent. The Price-Anderson Nuclear Industries Indemnity Act has been extended through 2025; the secretary of energy was ordered to implement the 2001 nuclear power "roadmap," and $1.25 billion was set aside by the Department of Energy to develop a nuclear reactor that will generate both electricity and hydrogen.

Add to that billions of dollars in infrastructure improvements—everything from improved roadways to mass transit investment in cities across the country—and "going green" can have the entire country churning with one hyper-inflated industry's stock prices.

The journalistic boosterism has already begun anew in the local papers. On January 7, Christine Grant—a research analyst at Light Green Advisors, a Seattle green investment company—wrote an op-ed in the P-I, chastising public agencies for not investing "green."

Seattle has a national reputation for being green. Despite Seattle's commitment to sustainability in so many other areas, it is surprising that our environmental consciousness has not been extended into our investments [...] Implementing environmentally responsible investment strategies into the management of public funds has yet to take off here, though it is a growing trend with forward-thinking institutional investors globally.

Ironically enough, a week later, a P-I blogger wrote about how city employees are petitioning the city to end just such programs. The precipitating event was the city's employee retirement system's $10 million investment in Imperium Renewables, a biofuel giant here in Seattle which just lost its CEO, cancelled its $345 million IPO, and laid off a portion of its work-force, signaling that just maybe the city's 3.2% ownership stake isn't the best investment.

A sign of things to come? Most definitely. But at this point it's merely a small stumble on the road to victory. What's the retirement security of thousands of city employees compared to great national project of saving the environment and making bank in the process?

Like we said, we wish we could bluster like Thomas Frank, but unfortunately, all we can manage is a sad little sigh. Maybe third time's the charm. Maybe it won't be that bad. Or maybe some time around 2014, we'll look back on this and think to ourselves, "Who was that guy we were reading in Harper's? Damn! He was on the ball!" But in the meantime, what's there to be done? Not much, unless you count jumping on a bunch of stocks we plan to have sold well before the next bubble pops.

Image of the Rainier Brewery by ntisocl, from the Seattlest Flickr Pool.