Has Our Economy Become Dependant On Bubbles?
from the that-wouldn't-be-good dept
I've said in the past that economic bubbles aren't necessarily a bad thing for the overall economy. Afterall, a bubble (at least one in a productive area, such as technology) tends to get a lot of money thrown at some problems, allowing a variety of innovation to take place very rapidly -- effectively throwing a lot of ideas at a wall to see what sticks. The fallout from a bubble popping often harms investors who bet on the wrong players in the bubble, but the fundamental benefit to society is often positive: a lot of infrastructure gets built very, very fast, and the strongest survives (and often buys up leftovers for pennies on the dollar).However, there are others sides to the story as well. Joel West points to a recent interview of economists Martin Feldstein and Joe Stiglitz, where Stiglitz worries that we've built an economy based on bubbles:
Joseph Stiglitz: We had the tech bubble, followed by the housing bubble. But once we fix the recent mess, what will replace these bubbles as the engine for the economy?Along those same lines, economist Hal Varian has written, in the Wall Street Journal, a very straightforward and clear explanation of why the economy is stuck in neutral right now. Basically, (and, yes, I'm significantly paraphrasing), there's no new bubble to invest in, so (as Stiglitz implies above), everyone's looking for the government stimulus package to basically act as an artificial bubble until such time as a new bubble rises out of the mess. And, for that to happen in a productive way, any sort of "stimulus" needs to create incentives for others to invest in productive, growth-producing parts of the economy, rather than just throwing cash at pork barrel spending projects. This is a pretty fine line to walk (especially since it's politicians who are working out the details, and they love pork barrel spending).
Feldstein: What will replace the consumer spending bubble?
(Both men): We run the risk of the economy becoming depend on constant stimulus to replace these bubbles.
Stiglitz: I worry that after two years of stimulus, that the economy won't be going on its own, and then what will we do?
And, to make matters even scarier, economist David Henderson points out that recent research from economists Christina and David Romer (it's worth noting that Christina Romer is Obama's choice to chair the Council of Economic Advisers) suggests that gov't fiscal policy in an attempt to modify business cycles doesn't work. In other words, things are going to be pretty messy in the economy for a while, unless we can come up with a productive and useful bubble quickly. Anyone have any suggestions?
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Filed Under: bubbles, christina romer, economy, hal varian, joe stiglitz
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Teleporters.
But seriously, I hope that we aren't based on bubbles now. In the end, it seems to me that there are only so many bubbles to be had, and then what?
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The Engine of the American Economy
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Re:
Note: I drive a Jeep so if it can go in my car it will go in anyone's, that way they don't have to spend $40,000 to go green.
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Parallel to Drig Addiction
The economy needs rehab, and more of the same drug won't fix it.
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Re: Parallel to Drig Addiction
Economic rehab should include rebuilding our production capabilities, producing quality goods, and teaching kids they have to work for what they want and not expect it as a handout from the state.
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Yeah, everything has already been invented :).
That said, the problem with bubbles is that they inevitably pop.
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Energy R&D
Some think energy is not sexy enough to get into. But I think otherwise. Specifically, Transportation Energy Usage is by far the least efficient energy user, and there seems to be a huge opportunity in R&D in that area.
Also, Obama has indicated a strong need to pursue that direction for national security reasons. Gas will undoubtedly go back up in price, and fluctuates violently. Exploring Alternative Transportation energy from an emissions and efficiency standpoint could kill two birds with one stone.
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The Size of The Ripple
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Everything is cheap, low quality rapidly produced merchandise.
Good luck digging America out.
USA doesn't produce anything but weapons, drugs and propaganda at a higher level than other countries.
Oh, and I almost forgot. You are also the largest producer of useless leadership.
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(This is not mocking, not condescending...but is merely a feeble attempt at humor)
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Be careful
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The Onion had a Better Story already
http://www.theonion.com/content/news/recession_plagued_nation_demands
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ABCT Theory
Is anybody paying attention to Austrian economists? They already predicted correctly the 1929 market crash with Lugwig von Mises.
I heard one adherent to Austrian economics already predicted that the housing market will crash two years ago before the crisis.
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Re:
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$13 trillion dollar stimulus
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*pop*
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The Best Idea
An alternative solution is a good old-fashioned war. We'll get the war machine cranked up, and make the auto companies useful again building tanks. We just have to make sure we win so we don't get nailed with reparations.
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Re: The Best Idea
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Re: The Best Idea
Might as well just pay everyone to dig holes in the ground. That will create wealth!
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Next Bubble or no bubble
As for the next bubble, think Green... people pouring money into solar and the like seems likely to me.
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kinda silly
And we're going to "dig" are way out buy borrowing more.
America is peaking, 290-350 years is a good run though.
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um...what about the gas bubble?
The housing bubble led to the gas bubble as people fled to the "commodities" after the bubble started to burst and people tried to save their money by being in something stable...to the tone of $60 Billion dollars more than usual being dumped into one commodity...without even going into gold/platinum/pork bellies and OJ.
That was a big bubble and dumb investors jumped in as analysts trying to get as much return as possible talked up $200 gas.
I didn't invest as it was an obvious bubble, but unlike other bubbles where just investors are hurt the general consumer got hurt, and not in just the US, it was felt across the globe in almost every developed nation not subsidizing it's energy costs.
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Amatuers make bubbles
For that reason, I don't see anything involving green+auto becoming a bubble without some serious de-regulation. I seem to recall (this was back in the 80s) that it cost more than a new car to get California to run the full battery of tests necessary to approve a particular engine+carburetor configuration.
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Re: Amatuers make bubbles
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Economic Bubbles
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Tulips
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To go in a different direction...
Next, I'd like to line every street in this country with some sort of magnetic energy bearing strip, then move forward in two phases: First, get every individual an converter kit so their cars will adhere to, be driven automatically by and powered by these strips, and second, start phasing out personal vehicles altogether and replacing them with taxpayer bought public cars that are able to be ordered online and are usable by everyone as a massive public transit system nation wide.
Finally, I'd like to see pigs crossed with sables/minks/martens. We can harvest their fur for clothing and eat their tasty flesh. Think how long the strips of bacon could be!!! YES!
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"Bubble" Meaningless
So even something as common and banal as commodity prices are subject to what one might call "bubbles", but really price fluctuations are happening all the time, on all scales; we just call the bigger ones "bubbles", and assign special significance to them just because they're big, not because they're actually significant.
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Bubble Confusion
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I have an idea.
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I have an idea.
I've never fathomed why so many investors would jump on the same bandwagon of a particular arena as opposed to doing what they're supposed to do. Even a moron in a hurry would know that wagons can only carry so much before they break.
I don't believe another bubble is needed. I believe the people who have the money want to hold on to it because they just don't know what's going to happen. Even if loans are given, there's that fear something will go wrong. So why take a chance?
With $350 billion already spent, my question is: Where the hell is it? The auto industry has $15B of it and the banks took a large chunk of it, but consumers can't get loans so where is the money?
To think, for once second, a bubble is needed to get the economy back in swing is a scary notion because it just means we'll go through all this again.
Investors, here is my idea:
TAKE A DAMN CHANCE AND REINVEST IN THIS COUNTRY.
GIVE PEOPLE A CHANCE TO MARKET THEIR IDEAS.
GIVE PEOPLE A CHANCE TO RUN A BUSINESS.
INVEST IN THE PEOPLE THAT HELPED PUT YOU WHERE YOU ARE TODAY.
If you can't do that, get the hell out of the investment world. You don't belong there.
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Re: I have an idea.
An even better solution is to build an international economy where those in developing countries have the same opportunity to earn as those in the States or Europe. The common connection is the Internet.
What's a job that anyone from anywhere can do over the net?
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Some good can come out of this
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