Part 1: INFLATING THE BUBBLE First bubble element – sub prime mortgages Every great bull market that turns into a bubble has similar characteristics. It starts with a reasonably good idea. Using long-term mortgages to pay for homes is a good idea, with a few important caveats. These are obvious to anyone who has bought a house; like the need for a substantial down payment, the verification of income, an independent valuation, etc. But human nature is such that, given enough time and the right incentives, any endeavour will be corrupted. This is one of the two critical elements of a bubble. What was once a good idea becomes a farce. The problems with the US mortgage market (and to a lesser extent the UK as well) are now well documented....