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If we are going to get out of this recession it seems like we need to create a new type of economic bubble. In the 1990s we had the Internet Bubble, then the stock market bubble, then the credit bubble, then the energy bubble, then the housing bubble. Each one created a boom and bust cycle that for a very short period of time created lots of money and wealth, then we crashed.
The end of every recession is always a new bubble.
What is the new bubble?
Infrastructure Spending Bubble
Clean Energy Bubble
Massive government spending Bubble?
Can we get out of the current economic recession without going back to a new bubble?
We have a bubble monetary system. There is no way until it is addressed. As assets go up in value their ability to serve as collateral goes up. This allows it to be the bases of new money which causes inflation and assets go up in price. The same assets that serve as a monetary base as collateral are the same ones used as an inflation hedge and prices go up even more which becomes ever more collateral. Then the whole thing unwinds as deflation since inflation hedges are no longer desired and assets serve as dwindling collateral for any new loans. The cycle will continue. The housing market is just the epitome.
If you want out put you efforts behind ending the fractional reserve system that allows banks to inflate the money supply by promissory agreements and the collateral behind them.
If we are going to get out of this recession it seems like we need to create a new type of economic bubble. In the 1990s we had the Internet Bubble, then the stock market bubble, then the credit bubble, then the energy bubble, then the housing bubble. Each one created a boom and bust cycle that for a very short period of time created lots of money and wealth, then we crashed.
The end of every recession is always a new bubble.
What is the new bubble?
Infrastructure Spending Bubble
Clean Energy Bubble
Massive government spending Bubble?
Can we get out of the current economic recession without going back to a new bubble?
How about we start manufacturing stuff again and say goodbye to bubble economies forever.
See, this is what I also think. However, the problem with us manufacturing our own products is that people don't want to have to pay what those products are going to cost if made in America. American workers certainly won't/can't/shouldn't work 18 hours a day for $100 a month as Chinese factory-manufacturer workers are forced to work for.
If we are willing to pay more to own less because we love our country and it's financial health.....then we could probably pull ourselves out of this mess.
See, this is what I also think. However, the problem with us manufacturing our own products is that people don't want to have to pay what those products are going to cost if made in America. American workers certainly won't/can't/shouldn't work 18 hours a day for $100 a month as Chinese factory-manufacturer workers are forced to work for.
If we are willing to pay more to own less because we love our country and it's financial health.....then we could probably pull ourselves out of this mess.
This is biggest lie that people have bought into. If you look back before everything came from China you will find that prices haven’t really come down. Instead they are more expensive than they ever were. All the savings that are gained from moving manufacturing to China are enjoyed by the corporations and very little savings are passed on to the consumer.
The reason we are in this mess is that during the 90’s we lived off the internet bubble. Then in the last 8 years we lived off the housing bubble. All this masked the real effect of losing all those high paying manufacturing jobs. Only a handful of “service jobs” pay what a manufacturing paid the rest are lower paying. Middleclass manufacturing jobs are essential to a strong economy. Our government has tried to hide this fact with stimulus packages that will not solve the problem, only delay the pain.
The Japanese were manufacturing just fine when they had their bubble in the late 80s. The US is another example in the 20s. Bubbles are simply a monetary problem and I explained the mechanics of it. Money is produced by durable assets and their ability to serve as collateral for credit(money). It tends to self reinforce for booms and busts. My asset will tend to go up in value during inflation. As this asset increases in "value"(actually monetary bloat), I can then "leverage" this asset for new loans. See home equity loans.
1. Home equity loan expands the money supply with house serving as collateral.
2. Inflation cause house to go up in price.
3. Inflationary momentum causes people to seek shelter from inflation and buy even more housing.
4. Another round of home equity loans continues to bloat the money supply and durable assets continue to froth.
5. Unwind .......
Boom/bust and bubbles is always the result. Same thing happened with oil as speculators financed their positions with oil they already had to buy more oil.
Its fractional reserve money all the way that is behind this. Full reserve banking will not create new money just because someone wants to speculate. They will need to borrow from existing money in such a case.
I I also notice there is no explanation to the mechanics to this manufacturing theory.
The Japanese were manufacturing just fine when they had their bubble in the late 80s. The US is another example in the 20s. Bubbles are simply a monetary problem and I explained the mechanics of it. Money is produced by durable assets and their ability to serve as collateral for credit(money). It tends to self reinforce for booms and busts. My asset will tend to go up in value during inflation. As this asset increases in "value"(actually monetary bloat), I can then "leverage" this asset for new loans. See home equity loans.
1. Home equity loan expands the money supply with house serving as collateral.
2. Inflation cause house to go up in price.
3. Inflationary momentum causes people to seek shelter from inflation and buy even more housing.
4. Another round of home equity loans continues to bloat the money supply and durable assets continue to froth.
5. Unwind .......
Boom/bust and bubbles is always the result. Same thing happened with oil as speculators financed their positions with oil they already had to buy more oil.
Its fractional reserve money all the way that is behind this. Full reserve banking will not create new money just because someone wants to speculate. They will need to borrow from existing money in such a case.
I I also notice there is no explanation to the mechanics to this manufacturing theory.
Japanese did fine? Is that why they called the 90 the lost decade? I think you need a new comparison.
“Inflation cause house to go up in price.” Really? Explain how that worked from 92 thru 97 in So Cal. We had inflation in 92, but housing prices fell over 20%. Every year thru 97 more inflation, yet housing prices were flat. In 98 – 2005 supposedly inflation was low or “in check”, however housing prices ballooned out of site. Are you sure that was inflation causing that?
As for the “manufacturing theory”.
Simply put a worker that makes lets say $18. per hour at a manufacturing plant loses that job and replaces it with an $8 per hour job they no longer have the purchasing power they once had.
Japanese did fine? Is that why they called the 90 the lost decade? I think you need a new comparison.
Hi RedNC,
Why do you misrepresent what I said?
"The Japanese weremanufacturing just fine "
Quote:
“Inflation cause house to go up in price.” Really? Explain how that worked from 92 thru 97 in So Cal. We had inflation in 92, but housing prices fell over 20%. Every year thru 97 more inflation, yet housing prices were flat. In 98 – 2005 supposedly inflation was low or “in check”, however housing prices balloonedout of site. Are you sure that was inflation causing that?
Inflation was "in check" because the numbers are fudged to not include housing in the numbers. Its redefined as "equity". Its inflation I says. Inflation was completely understated.
Housing is simply a major component behind the money supply. Why are you taking just one example in my second post when I clearly stated, in the first post, it was any asset that can serve as collateral. Wall Street leveraging took up the slack. So did consumer debt which is relatively new, not requiring collateral. It gave some respite to housing until it started to serve as a basis for monetary growth once again until now.
As for the “manufacturing theory”.
Simply put a worker that makes lets say $18. per hour at a manufacturing plant loses that job and replaces it with an $8 per hour job they no longer have the purchasing power they once had.
What does this have to do with bubbles? How does a loss of buying power from going from $18 to $8 going to cause a bubble or inflation? What is the argument? Loss of supply?
I am willing to look at a case to be made but I see no reason to consider cheap labor to be behind asset bubbles. Its simply a shift in price because of supply. East Asians have vastly increased the labor pool.
Money supplies on the other hand directly effect valuations and when they are unstable so are the valuations aka boom/bust, bubble/deflate cycles.
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