-
Next bubble?
[link=http://www.washingtonpost.com/business/economy/steven-pearlstein-you-bet-its-another-bubble/2011/10/31/gIQAKOtxnM_story_2.html]http://www.washingtonpost.com/business/economy/steven-pearlstein-you-bet-its-another-bubble/2011/10/31/gIQAKOtxnM_story_2.html[/link]
Move along nothing to see here…God forbid we regulate destructive capitalism -
25 Replies
-
ORIGINAL: Thor
[link=http://www.washingtonpost.com/business/economy/steven-pearlstein-you-bet-its-another-bubble/2011/10/31/gIQAKOtxnM_story_2.html]http://www.washingtonpost.com/business/economy/steven-pearlstein-you-bet-its-another-bubble/2011/10/31/gIQAKOtxnM_story_2.html[/link]
Move along nothing to see here…God forbid we regulate destructive capitalism
The derivatives bubble has been inflating for quite some time.
Unfortunately, these bubbles are not isolated to capitalistic societies. The impending bust of the ginormous debt bubble in Europe, fueled by reckless government expenditures, is a prime example.
-
@thor
gold represents <0.5% of global financial assets, treasury bills and US stocks God knows how much. Soon you’ll be the only guy holding paper with a 3% yield for 30 years, thor. You won’t even have enough money for an “I’m stupid” sign. The bubble is in people like you, people who get their knowledge from news articles. Take your head out of your ass (and anything else you got in there) and read some [link=http://mises.org/books/Theory_Money_Credit/Contents.aspx]books[/link].
-
Of course it is a bubble. It is simply not a bubble worth worrying too much about. Most people in the world don’t horde gold, do not have the majority of their wealth in gold, etc…unlike, say, housing.
Frankly, China as a nation is a MUCH more worrying bubble that no one is talking about.
-
ORIGINAL: MISTRAD
Frankly, China as a nation is a MUCH more worrying bubble that no one is talking about.
I’ve already talked about it =p
They’ll be going kabooom soon enough. The Europeans’ talk of China coming to their rescue is so laughable.
-
ORIGINAL: BarelyPassed
ORIGINAL: MISTRAD
Frankly, China as a nation is a MUCH more worrying bubble that no one is talking about.
I’ve already talked about it =p
They’ll be going kabooom soon enough. The Europeans’ talk of China coming to their rescue is so laughable.
True enough, BP.
They are over leveraging at levels that made us look tame in the last decade.
-
-
-
ORIGINAL: Zorak is the man
@thor
gold represents <0.5% of global financial assets, treasury bills and US stocks God knows how much. Soon you’ll be the only guy holding paper with a 3% yield for 30 years, thor. You won’t even have enough money for an “I’m stupid” sign. The bubble is in people like you, people who get their knowledge from news articles. Take your head out of your ass (and anything else you got in there) and read some [link=http://mises.org/books/Theory_Money_Credit/Contents.aspx]books[/link].
Your “books” link leads to this pearl: http://mises.org/books/tmc.pdf
It’s not clear how a book published in 1953, before the advent of derivatives, sub-prime loans, the disconnect from the gold standard, the EU, the widespread use of credit cards, dual income families, the aging of Boomers retiring out of the workplace and out of the consumer market, and the merger of the banking and speculation industries, can in any way be considered relevant to today’s economy.
-
Don’t try to use logic with Zorak. He never lets facts interfere with his beliefs.
-
ORIGINAL: Raddocmed
Don’t try to use logic with Zorak. He never lets facts interfere with his beliefs.
You should learn from Zorak. He is more knowledgeable on these subjects than the vast majority of Americans.
Many people here are living in denial and refuse to confront reality.
-
-
ORIGINAL: Ethtera
ORIGINAL: Zorak is the man
@thor
gold represents <0.5% of global financial assets, treasury bills and US stocks God knows how much. Soon you’ll be the only guy holding paper with a 3% yield for 30 years, thor. You won’t even have enough money for an “I’m stupid” sign. The bubble is in people like you, people who get their knowledge from news articles. Take your head out of your ass (and anything else you got in there) and read some [link=http://mises.org/books/Theory_Money_Credit/Contents.aspx]books[/link].
Your “books” link leads to this pearl: http://mises.org/books/tmc.pdf
It’s not clear how a book published in 1953, before the advent of derivatives, sub-prime loans, the disconnect from the gold standard, the EU, the widespread use of credit cards, dual income families, the aging of Boomers retiring out of the workplace and out of the consumer market, and the merger of the banking and speculation industries, can in any way be considered relevant to today’s economy.
Because most of that doesn’t matter to the pure economics of booms and busts. That is why.
The only difference that I can tell now is that those booms and busts are becoming more diverse…maybe because people have more money and credit is more available. The basis of all booms is leveraging…and that has become more possible in this world. Of course, small business ventures and capital ventures are also more possible because of that credit.
People who think these things are ‘new’ have not read enough history. Are they becoming more ‘common’? I think there is an argument for that, but there are also explanations that don’t have to do with goverment regulations either…some I stated above.
-
All booms are not due to leveraging. There have been historical bubbles that had nothing to do with leveraging. What I see as the common denominator is irrational valuation. The .com bubble was based more on hype than leveragibg. People bought into the hype that the .com companies were going to eat the lunch of every brick and mortar company. People paid outlandish sums for stocks in companies that never made a penny. I would admit that all the finacial sector bubbles have been based on banks leveraging more than they should. Still if investors had said how are they making these huge profits instead of being led like sheep to a slaughter the banks may not have been able to do some of this. The single biggest factor was probably the lack of transparency. Nobody knew exactly what they were buying, rating, giving swaps for.
-
@Ethtera
“Your “books” link leads to this pearl: [link=http://mises.org/books/tmc.pdf]http://mises.org/books/tmc.pdf[/link]” – wow, you know how to use the internet! But if you really want to impress me, why don’t you read the book and stop embarrassing yourself. I mean, you must be an idiot or you are utterly ignorant of economics to claim that economic laws have changed since 1953.
@Raddoc
” Don’t try to use logic with Zorak. He never lets facts interfere with his beliefs.” – which facts are those?
-
-
ORIGINAL: MISTRAD
Of course, small business ventures and capital ventures are also more possible because of that credit.I don’t understand the point you’re trying to make. People can do a LOT of stuff if they have more money, especially money handed to them that they didn’t have to work for. But that’s not necessarily a good thing for the economy, especially if the borrowers are expected to pay it back but have no reasonable means to do so.
There’s no reason to assume that “more possible” means “better”. I mean, if we forced the banks to lend everyone $100G, then increased consumer spending would be “more possible” too, but that’s not a solution to a solvent economy either. I think the rash in foreclosures bears out that point well enough.
In fact, I would content that way too many “small business ventures and capital ventures” were extended an inordinate amount of credit which contributed to the current economic collapse (with Borders Books among the latest casualties).
No such credit was issued with that kind of reckless abandon back in ’53, and so the phenomenon had not yet been characterized. Had it been that well-known back then, I doubt very much that the Feds would have made such absurd blunders in economic policy over the past 20 years.
-
ORIGINAL: Ethtera
ORIGINAL: MISTRAD
Of course, small business ventures and capital ventures are also more possible because of that credit.I don’t understand the point you’re trying to make. People can do a LOT of stuff if they have more money, especially money handed to them that they didn’t have to work for. But that’s not necessarily a good thing for the economy, especially if the borrowers are expected to pay it back but have no reasonable means to do so.
There’s no reason to assume that “more possible” means “better”. I mean, if we forced the banks to lend everyone $100G, then increased consumer spending would be “more possible” too, but that’s not a solution to a solvent economy either. I think the rash in foreclosures bears out that point well enough.
In fact, I would content that way too many “small business ventures and capital ventures” were extended an inordinate amount of credit which contributed to the current economic collapse (with Borders Books among the latest casualties).
No such credit was issued with that kind of reckless abandon back in ’53, and so the phenomenon had not yet been characterized. Had it been that well-known back then, I doubt very much that the Feds would have made such absurd blunders in economic policy over the past 20 years.
That is true. More credit, blindly handed out, is not necessarily a good thing…and I never said it was.
But again, let me make this point: 1950s economics for America was an anomaly. We were over 50% of the world’s gdp at the time…with Europe and Asia devastated. Unless you plan to nuke half the world, that is not happening any time soon. So when people use that period of time as an example of American greatness, they are deluding themselves. We could have had the worst economic policy in the history of the earth, and done well in that period, because we had no competitors…we were a virtual monopoly.
Right now, we don’t have ENOUGH credit…or at the very least, credit and capital going to the places we need it. As statistics show, the people benefiting the most from the post 2008 world is…Wall Street. There was a report yesterday that showed Wall St made more money in the 2 years of the Obama Presidency than EIGHT YEARS of Bush. The reason? Because the feds have given banks and others the cheapest credit in history. So instead of lending to private industry and small businesses, they are hordeing cash, and making a boat load.
The reason the US has historically been able to advance faster than others had been because of the freedom of individuals to innovate, the ability of new blood via immigration to come in, and the ability to obtain capital for ventures. Right now, credit is not flowing. Innovation is struggling. That is what we need to do to get going again…and those things are not going to cause a bubble. Ignorant lending with no proper collateral will .
-
ORIGINAL: MISTRAD
Right now, we don’t have ENOUGH credit…or at the very least, credit and capital going to the places we need it…The reason the US has historically been able to advance faster than others had been because of the freedom of individuals to innovate, the ability of new blood via immigration to come in, and the ability to obtain capital for ventures. Right now, credit is not flowing. Innovation is struggling. That is what we need to do to get going again…and those things are not going to cause a bubble. Ignorant lending with no proper collateral will .
I’m going to have to disagree with at least part of your assessment. I agree that loans should only be issued on the basis of appropriate collateral, but it was not “investment in innovation” that collapsed this economy. It was credit that collapsed the economy, and we’re better off without it. Buy a $20k car you CAN afford now and not a $100k car you HOPE you’ll still be able to afford for the next 36-60 months of the lease. Same for your TV, stereo, computer, and other accessories that end up forcing a double digit percent of people to file Chapter 11. Such “credit” has nothing at all to do with what makes America great. It’s what makes our economic leaders look like buffoons to the rest of the world.
The most innovative period of the industrial revolution in the USA was not funded by credit, it was funded by venture capitalists and investment banker sugar daddies who were willing to take their own financial risks in exchange for a piece of the action. Edison, Ford, Watson, and Bell, (and even Jobs & Wozniak, thanks to Hambrecht & Quist) relied very little on credit. Instead, they relied on their venturesome ‘angels’ who understood great innovation when they saw it and who understood that if the innovation went belly up, so did their investment.
The payback of credit and loans, on the other hand, does not depend on the success of innovation at all. Rather, such funding simply relies on your legal obligation to pay back every red cent plus interest, regardless of whether your innovation pays off. That’s a FAR different thing than investing in innovation, itself. Credit is simply a legal pyramid scheme that is bound to tumble.
History shows that innovation is fueled by peer-reviewed investment capital primarily when the enrichment of such capital depends on the innovation’s success and not on whether the innovator will be able to pay back the bank loan with interest even if the innovation fails.
I have no problem with short-term credit that offers the convenience of not having to walk around with a pocket full of cash, e.g., to buy groceries and gasoline. But depending on credit to buy major items you simply cannot afford with cash is a VERY bad thing. Basing an economy on a GDP that consists of so much unpaid credit is an illusion and is unsustainable, as confirmed by current events.
In my opinion.
-
Mark my words:
The next gargantuan bubble to explode is the student loan bubble. One trillion dollars loaned, more than half not being paid back on time, and will never be paid back on time.
-
ORIGINAL: osler_v2.0
Mark my words:
The next gargantuan bubble to explode is the student loan bubble. One trillion dollars loaned, more than half not being paid back on time, and will never be paid back on time.
I think it is a bubble, but that is one that will take years to burst…people will slowly default, not do it all of a sudden.
-
Iwouldn’t consider it a bubble per se, but a problem. Same for under funded public pension funds. It has been stated that the Feds have under funded civil service by trillions. I also think that student loans will not pop, but slowly deflate because of the way that the laws on them are. The only way to get out of them is dclaring bankruptcy, and even then they can be held against future earnings. If you try to walk away the Feds have powers to collect against you.
On the bigger argument about credit. Credit is double edged sword. If companies could not obtain credit they would be severely hamstrung in doing business. Nearly companies depend on lines of credit, bonds, loans, etc. All governments do also for both good and bad. Even the venture capitalists used loans to fund much if not most of what they did. One main difference is that in the past rating companies did a pretty good job of rating corporate debt. They did a horrible job rating mortage debt. Nobody even tried to rate many swaps, derivatives etc. Nobody knew what the risk for these debts were. If everybody had clear idea of the rsik for any debt then much more reasonable decisions could and would be made. -
I actually don’t think rating agencies ever did a good job rating debt. I just think their ineptitude was exposed because of the credit crunch.
-
ORIGINAL: MISTRAD
I actually don’t think rating agencies ever did a good job rating debt. I just think their ineptitude was exposed because of the credit crunch.
They never did a good job due to conflict of interest.
The people these agencies rate are also the ones who pay these raters.
-
Bonds are the next big bubble.
Stocks, commodities, real estate, etc. are puny compared to the size of the bond market.
Interest rates are, and have been for some time, effectively zero. Nowhere to go but up. Not today, not tomorrow, but at some point interest rates will rise. Probably start in Europe when they wake up and realize the only way to ‘solve’ their problems is to print more money and make the debt on the books worthless. -
We have an asset bubble. That is a definite.
All of these speculative vehicles are so intertwined, it’s difficult to discern which is which at this point.
Bonds. Derivatives. Commodities. You name them. Just get some popcorn and wait for the next big splash. -
What, me worry?
[link=https://www.axios.com/2022/05/13/adjusted-rate-mortgages-rising-interest-rates?utm_source=twitter&utm_medium=social&utm_campaign=editorial&utm_content=economy-business-housing]https://www.axios.com/202…onomy-business-housing[/link]
[h1]Adjustable Rate Mortgages are Back[/h1]
(ps — watched [i]The Big Short[/i] again on the plane yesterday … so good.)
-
I don’t understand why anyone with credit would’ve gotten an ARM at any point over the past few years. I refi’d to 2% 15 years.
-
Here’s another one. Buy now pay later. Most of have probably seem the online checkout buy now for $20 and it’s really a $20 fee per month till you pay off the purchase. Apparently that is based on soft credit checks. So nothing that will affect a credit score until you get sent to collections. Also the various vendors of this type of credit can’t see how much you have outstanding. So it would appear a lot of people are using the buy now pay later and getting in over their head on a bunch of small loans.
-
-
-
-
-
-
-
-
-
-
Bubbilicious student loans.
When the government guarantees loans and doesn’t allow discharge through bankruptcy, it results in moral hazard and allows lenders to ignore risks.
Generation Jobless: What Hedge Funds Can Teach College Students
http://online.wsj.com/article/SB10001424052970204224604577030562170562088.html?mod=WSJ_hp_LEFTTopStories
