Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Blame the private banking institutions who gave out bad mortgages. Don't blame the federal reserve or politicians.
You're right.
The politicians who've made money on the housing bubble (Newt Gingrich) and the federal reserve who oversees all monetary policy in the United States had no clue.
They give a great portion of the population buying power. Believe it or not. The real estate bubble of the mid 2000s was economic growth. Construction went up. Unemployment decreased. What more does there need to be to indicate economic growth?
They're the product of speculation, not value creation. That's why an economic bubble isn't actual growth, much in the same way your credit limit isn't real income.
Recall the stock market before the 1929 wall street crash - people were getting rich, unemployment was down, everyone was happy. Then reality struck.
Modest, predictable growth based on tangible production of value is far preferable to volatile swings driven by speculation. You may have slightly higher unemployment during the boom years, but you're less prone to the massive unemployment that inevitably comes with the crash. I give you Germany as Exhibit A.
Bubbles are bad unless you know 100% what you are doing just look at the dot com boom of the 90's and how people lost everything after the bubble popped and the same thing goes for the housing boom during the early-mid 00's then the crash of the housing market 08 which we are still feeling the effects from.
Bubbles are not growth because they are not sustainable and when the bubble bursts you usually lose your shirt and are sometimes worse off than when the bubble started (like housing).
It provides an environment of temporary speculation..some win but most lose.
Anyways, what viable alternative is there to spur economic growth without easy credit?
The viable alternative is gradually rising economic activity, driven by productivity improvement, innovation, and population growth--without the malinvestment and wealth destruction that are implicit in bubbles.
We are not richer as a society because decades of government policy favored housing over other kinds of consumption and investment, and the real estate bubble produced a blow-off top. Those empty McMansions represent wealth that could have been more profitably invested,
However, the creation of bubbles is in our DNA, part of what makes us human. In the spring of 2000, massive amounts of money went into the tech stock bubble. In the early 1970's, the Nifty Fifty growth stocks were the bubble. In 1979 (and perhaps 2011) it was gold. The summer of 2008, oil. In 16th century Holland, tulip bulbs. Look at the flood of money being invested in Treasury bonds (and bond mutual funds) at the lowest yields of our lifetimes--the stampede into "stable assets" is, in my opinion, a giant bubble.
But I love bubbles. People selling other assets in order to join the stampede into the bubble cause bargains to pop up in other places. I just go the other direction from the stampede. So keep it up, world!
We already have lower taxes. Taxes have little to do with economic behavior. Taxes were higher under Clinton, yet there wwas economic growth.
Clinton had the DotCom bubble triggering a lot of that growth, which blew up in mid to late 2000
What was the Dot-com Bubble?, triggering a recession we were just exiting when the Twin Towers were attacked. That recession was the justification, along with the economic meltdown that started post-9/11 because of those attacks, for the so-called Bush Tax Cuts.
Clinton also benefited from the "Peace Dividend" that came with the collapse of the Soviet Union and the drawdown of active duty US forces (although some of those transitioned to Reserve status, one of the reasons so many Guard and Reserve units had to be activated and deployed over the last 10 years).
They give a great portion of the population buying power. Believe it or not. The real estate bubble of the mid 2000s was economic growth. Construction went up. Unemployment decreased. What more does there need to be to indicate economic growth?
Are you serious? Um, do you know what foreclosures are?
Bubbles are false. It's a false economy. False hope.
Bubbles exist because of interference in the Market. The Laws of Economics can never be violated without penalty. You'd think people would have figured that out by now, but apparently that isn't the case.
Any time any entity interferes in the Market, and it doesn't have to be government, and can be a non-government entity, like Hospital Robber Baron Cartels, there is a penalty to be exacted proportional to the level of interference.
Quote:
Originally Posted by knowledgeiskey
Anyways, what viable alternative is there to spur economic growth without easy credit?
That is not up for you to decide.
The Market will make that decision for you.
Quote:
Originally Posted by knowledgeiskey
We already have lower taxes. Taxes have little to do with economic behavior. Taxes were higher under Clinton, yet there wwas economic growth.
Yet three times in your History a tax hike resulted in a depression, a major recession and a minor recession, and may have ultimately been responsible for a second minor recession, namely the one that occurred during the Clinton Administration.
You claim taxes were higher under Clinton, yet in reality he cut the Capital Gains Tax from 29% to 20%, and you did have a recession. It is quite likely his tax hike caused that recession. It is difficult to tell, because there were unusual circumstances surrounding that time period, namely Y2K.
Because of Y2K, you had things happening in your economy that normally would not have happened. And no, I ain't even talking about the hiring of more than 1 Million programmers (even dragging retirees out of retirement) to the claimed potential problem.
I'm talking about the hedging.
You run a manufacturing facility that sells goods to numerous wholesalers and distributors.....under contract.
Y2K is not a sufficient reason for you to fail in the performance of the contract, and your failure will cost you dearly in terms of legal action to remedy your failed part of the contract, and potential lost business plus future lost business.
In order to hedge against that, everyone, and I do mean everyone, over-produced like you couldn't possibly imagine. Companies were renting additional warehouse space because they were producing 1-3 years out in order to hedge, or insure, that they could fulfill of their contractual obligations, in the event of any happenings associated with Y2K.
Once people started realizing Y2K wasn't the problem some people made it out to be, the over-time was cut and then Clinton's taxes hit people and then you had a recession.
So you had a false boom (and false hope) right there at the end.
If you want to continue interfering in the market, then be prepared for never-ending negative consequences.
Human ingenuity creates greater and greater efficiencies and they grow much faster than the population.
The bubble burst which then creates and environment that causes a purge of the inefficiencies.
The population increases and those technologies are put into place.
Rinse and repeat.
Ideas grow faster than the populace.
Downturns are required to remove inefficiency.
The faster the technology increases the shorter the bubble and the more downturns you get.
Those who fight against bubbles are fighting against innovation and fighting for inefficiency.
Interesting theory.
I disagree, in so much as I think our economy should be diverse enough that bubbles, which I agree will always recur, are balanced out by other sectors. If everyone runs on one direction, the downturns are too devastating. Also, it seems like the poor are the ones who seem to disproportionately get the shaft in massive bubbles.
Also, large bubbles hide structural problems that sometimes need to be dealth with at the time the bubbles are in full inflation, rather than afterwards when capital has landed in too few hands.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
