But if (as you seem to suggest here) housing prices and mortgage loads were not unreasonable relative to incomes, given continued full employment, then there wasn't a housing bubble. Real estate prices appreciating to take into account improving incomes isn't a bubble - it's catch-up. It's only a bubble if it is unsustainable given full employment and prevailing nominal wages (e.g. because people take out mortgages that only make sense if they can sell the house for more than they bought it for).

Otherwise it's just a government failing to apply sufficient countercyclical fiscal policy when the catch-up period ends, and the private sector has to take some time to figure out what to do with all the people it previously employed to work in the catch-up.

The affordability of mortgages has been damaged more by people losing jobs and large parts of their income rather than the relatively minor interest rate increases to date.

If people are not being bankrupted by rising interest rates, then how would higher interest rates in the past have prevented them from going bankrupt today?

If interest rates are as irrelevant as you claim, why is it virtually the only policy tool the ECB actually uses on an ongoing basis?

Because the ECB believes that money supply drives inflation. (In the real world, it's the other way around.)

- Jake

Friends come and go. Enemies accumulate.