Existing accounts of failure to predict the financial crisis focus on the complexity
of the financial system, and are less useful for understanding crises in non-securitized
markets. We examine the roots of optimism leading up to the Eastern European mortgage
crisis through the case of Hungary, and use recent theories of expectations, which
understand them as both pragmatic and fictional practices that commonly incorporate
narratives. Based on archival research and interviews with bankers, regulators and
legislators, we demonstrate how the EU convergence narrative was central in forming
optimistic expectations. Fusing the underspecified convergence process with an orientalist
geographical imaginary, this narrative and its associated measures translated growing
indebtedness as catching up' with Europe, de-emphasized exchange rate risk through
a belief in European convergence and precluded crisis scenarios originating in the
European Union. Our findings contribute to theories of how economic expectations are
formed, stabilized and maintained by developing the concept of spatializing the future',
denoting practices that handle uncertainty by charting the future as movement in concrete
geographical or abstract space, along externally verifiable pathways.
