A note about research... And a scary concept...
After spending some quality time reading a leaked CitiBank memo from 2005 regarding Plutonomy (http://www.principiadiscordia.com/forum/index.php?topic=25129.0
) and cross-referencing it with investment trends from 2005-2008 I find myself wondering how the "best financial minds" could have missed the writing on the wall. Based on information in the memo and trends in marketing from 2005 onward, I postulate they DID see the writing on the wall.
In a nutshell, the memo examines certain irregularities in the global economy that have historically confused financial advisors. In the process of examining these irregularities the authors propose the concept that the income inequality fostered by the concept of the super rich ("Plutonomy") actually explains some of the stranger market fluctuations rather handily. The authors also rather clearly state that within countries that support income inequalities (US, UK, etc) that the concept of the "average" consumer is a falsehood. It makes sense, if you think about it. If 1% of the population accounts for 25% of the total income, while the bottom 40% only accounts for 10%, the consumer reports and marketing statistics that drive production corporations heavily favor the rich due to their massive purchasing power over the rest of us. It makes even more sense when you start factoring in that advertising is aimed at the moneyed few with the knowledge that the remaining demographics look to the ultra-rich as an example of success and would be brought to market by a desire to emulate that success.
Other things mentioned in the document clearly state that the Plutonomy participants would be relatively unaffected by a decline in the housing market as most of their sedentary income is tied up in equities rather than real estate. If you follow the saga of Countrywide Financial from 2000-2008 you begin to see financial moves that responded to a perceived "lack of demand" for the housing market, and it's subsequent collapse. Given the war economy that America was in, the market was surprisingly soft during the whole of President Bush's (Jr) tenure, possibly in part related to the Plutonomy again driving speculation with skewed numbers about the "average" consumer.
Admittedly a fair bit of this is speculation on my part and I certainly think that others may be able to offer a more objective picture, but given documents like these it's hard to think that no one knew what was occurring. The document itself pretty directly states that someone had a clear picture of the situation, complete with an action plan for how to best capitalize on it in 2005.
I urge you, read the memo for yourself...Educate yourself, formulate your own opinion and discuss it. Only by being informed and active thinkers can we hope to come to the best overall solutions for all of us.