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Originally posted by BlueDesignStudios
I think both High Quality & Mark raise some interesting points.
I'm with High Quality on his view of 'what if the government printed off more money' - I believe that to be the correct economics explanation, however I can also see things from an intuitive perspective that Mark has explained - it kind of goes inline with my thoughts of 'I wouldn't actually be hurting anyone if I forged $10Million in $100's would I?'
Realistically $10M extra in an economy wouldn't make much different, but in the scenario that High Quality presented he does show how things would change with an extra 1% of money.
Of course, there are pleanty of other effects this would have on the economy, secondary effects as I believe they are called. For example, it would effect exchange rates, interest rates, unemployment - perhaps not so noticably in practise, but in theory, at least.
As far as your first post Mark, I used to think of the problem through your eyes. Then I discovered economics 
While economics isn't real world stuff (anything in University isn't for that matter), it does show you how you can break down & analyse how the world works using supply & demand & other models. I actually enjoy this stuff now
Finally, you do raise valid points about HUMAN PSYCHOLOGY - you are correct on this, markets do work for a large part on this.
If you look at stock market crashes, why do they happen? Perception, and human psychology has a lot to do with it.
Same goes for the current housing boom the world is experiencing. Are houses worth as much as some people are paying thesedays? I doubt it - house prices can't rise forever, they're related to wages, and when interest rates go up, as they ultimately will, I think a lot of people will ask themself why did they buy that house!
Whew.. just my  .. but good to actually have an intelligent post on GFY .. thanks Mark 
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I could say a lot about your statements. But I'll start with your conception of housing prices.
Housing prices are determined 3 ways. Cost to build analysis, Income analysis (investment properties) and a third way that I dont quite remember....
But basically they usually all arrive to within 5% of each other. Supply and demand has a huge thing to do with cost to build, as does the present interest rates (determined by inflation figures, mostly).
If you want my 2 cents on it, housing prices WILL rise forever. Why? Population booms. As more mexicans cross the border, more babies are born, etc the demand will continue to rise. Add to that increasing government regulations across the nation on buildings means fewer builders / more costs which means fewer construction sites... etc.
As for stock market crashes... the 1929 crash was proven also to be due to government intervention. In his book "America's Great Depression" Murray Rothbard (famous encomoist) shows how the government, through monetary policy increased the money supply artifically (inflation), and thus created the "roaring twenties". The end result of course was over valued stocks to the point of internal collapse of 1929.
Hope that helps, once again