Here’s what Phil said during the interview:

“Real estate topped out in 2005 and 2006, and it’s likely to bottom out in 2010. This global economic downturn came as a surprise to many economists and so-called experts, who said they couldn’t foresee it happening. It was described as a generational or once-in-a-generation occurrence. However, I argue that this isn’t always the case.

“What I’ve found interesting through my research and historical studies is that each cycle is unique. If every cycle followed the same pattern, we’d all see it coming and act accordingly. But what I’ve noticed is that, about 13 or 14 years after a bottom, something unexpected always seems to arise.

“This something is always finance-related and often involves banks creating excessive credit based on the rental value of land. Eventually, the credit creation becomes unsustainable, and for various reasons, the land value starts to decline below the outstanding loans. This puts immense pressure on the banks. This pattern has been repeating regularly in the United States since the 1800s.

“One of the major issues seems to be Ricardo’s law of rent. Can you explain what it is and how it contributes to these property cycles? This is fascinating stuff, and it’s unfortunate that economists today seem to completely ignore Ricardo’s law of rent.”