Website review: "The next bubble: ...
dukejansen discovered this in Investing
•5 reviews since Jan 29, 2008
investing, economics, alternative-energy
•harpers.org/archive/2008/02/0081908
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dukejansen discovered 3 months ago- From the page: "The next bubble: Priming the markets for tomorrow's big crash"
- Ontix rated 6 weeks ago
- From the page: "Our economy is in serious trouble. Both the production-consumption sector and the FIRE sector know that a debt-deflation Armageddon is nigh, and both are praying for a timely miracle, a new bubble to keep the economy from slipping into a depression."
- solasaurus rated 7 weeks ago
- This article is a must read introduction to the history of financial market bubbles that have occurred over the past century or so. Not only does it explain how the bubbles are created by government, but introduces us to how the next - and very necessary - bubble will be created around the alternative enery sector. A very convincing article and well worth reading.
- laodan rated 8 weeks ago
- The next bubble: Priming the markets for tomorrow's big crash in Harper's Magazine by Eric Janszen Eric Janszen is the founder and president of iTulip, Inc. He formerly served as managing director of the venture firm Osborn Capital, CEO of AutoCell, Inc. and Bluesocket, Inc., and entrepreneur-in-residence for Trident Capital.
After 1975, the United States would never again post an annual merchandise trade surplus. Such high-value, finished-goods-producing industries as steel and automobiles were no longer dominant. The new economy belonged to finance, insurance, and real estate - FIRE. ... As FIRE rose in power, so did a new generation of politicians, bankers, economists, and journalists willing to invent creative justifications for the system, as well as for the projects - ranging from the housing bubble to the Iraq war - that it financed. ... In a bubble, fictitious value goes away when market participants lose faith in the religion - when their false beliefs are destroyed as quickly as they had been formed. Since the early 1980s, the free-market orthodoxy of the Chicago School has driven policy on the upward slope of an economic boom, but we're all Keynesians on the way down: rate cuts by the Federal Reserve, tax cuts by Congress, deficit spending, and dollar depreciation are deployed in heroic proportions. ... Even after the faith that supported a bubble recedes, false beliefs continue to obscure cause and effect as the crisis unfolds. Consider the chemical industry of forty years ago, back when such pollutants as PCBs were dumped into the air and water with little or no regulation. For years, the mantra of the industry was "the solution to pollution is dilution." ... Many decades later, with our plagues of hermaphrodite frogs, poisoned ground water, and mysterious cancers, the mistake in that logic is plain. Modern bankers, however, have carried this mistake into the world of finance. As more and more loans with a high risk of default were made from the late 1990s to the summer of 2007, the shared level of credit risk increased throughout the global financial system. ... As more and more risk pollution rises to the surface, credit will continue to contract, and the FIRE economy - which depends on the free flow of credit - will experience its first near-death experience since the sector rose to power in the early 1980s. Because all asset hyperinflations revert to the mean, we can expect housing prices to decline roughly 38 percent from their peak as they return to something closer to the historical rate of monetary inflation. If the rate of decline stabilizes at between 6 and 7 percent each year, the correction has about six years to go before things stabilize, leaving the FIRE economy in need of $12 trillion. Where will that money be found? ... Now the Funds Rate is only 4.5 percent, the dollar is at multi-decade lows, the federal budget is in deficit, and tax cuts are still in effect. The chronic trade deficit, the sudden depreciation of our currency, and the lack of foreign buyers willing to purchase its debt will require the United States government to print new money simply to fund its own operations and pay its 22 million employees. ... ... we can expect to see the creation of another $8 trillion in fictitious value, which gives us an estimate of $20 trillion in speculative wealth, money that inevitably will be employed to increase share prices rather than to deliver "energy security." ... Given the current state of our economy, the only thing worse than a new bubble would be its absence. The next bubble: Priming the markets for tomorrow's big crash Excellent article. If you are interested to understand what drives our economies and societies in early 21st century then you should absolutely read this extremely long article.
- The next bubble: Priming the markets for tomorrow's big crash in Harper's Magazine by Eric Janszen Eric Janszen is the founder and president of iTulip, Inc. He formerly served as managing director of the venture firm Osborn Capital, CEO of AutoCell, Inc. and Bluesocket, Inc., and entrepreneur-in-residence for Trident Capital.
