Merijn Knibbe — Inefficient financial markets and an irrational economist: examples

Combine this with the fact that these loans are ‘financed’ by money creation and with the diabolical feedback loop between money printing and higher asset prices, asset prices wich in turn are the collateral for additional money printing and not much is left of the rationality of the housing/mortgage market.

Mr. Fama, a winner of the economics Nobel price and a proponent of the idea of rational markets however seems, rather irrationally, unaware of such basic monetary economics, i.e. that our stock of money is to a very large extent created by banks which lend freshly printed money to people buying houses. [From at article translated from Dutch by Merijn Knibbe]

"Money printing" and "lend[ing] freshly printed money" are confusing. What it is means is the central bank providing liquidity for bank lending on mortgages irrespective of the quality of credit, e.g., value of the underlying collateral and ability of the borrower to repay. 

If a central bank enables imprudent or even predatory lending instead of exerting its regulatory power then asset values increase beyond their worth based on credit fundamentals, which is unsustainable. When this persists, eventually bubbles form that will inevitably burst. As Irving Fisher and Hyman Minsky described.

Eugene Fama seems to be unaware of this.

Real-World Economics Review Blog
Inefficient financial markets and an irrational economist: examples
Merijn Knibbe