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Old 01-03-2009, 05:11 PM
 
1,989 posts, read 4,024,164 times
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Look at this chart of the Dow since 1929:

http://ichart.finance.yahoo.com/z?s=^DJI&t=my&q=l&l=off&z=l&p=s&a=v

Doesn't it look like a bubble? Why isn't it? What if it is....
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Old 01-03-2009, 07:14 PM
 
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Yep, the great expansion of credit started around 1980. As we became less and less industrialized and shipped more and more work overseas, we expanded credit. This created the illusion that the middle class was doing well even though all evidence on wage growth tells otherwise. This credit expansion in the form of extended period car loans, no money down low interest mortgages, proliferation of credit cards et. al allowed us to live beyond our means for an extended period. But one day the piper needs to be paid if he is to continue. We are currently settling our account with the piper.

By the way, when I say us, I truly mean all of us. Even if you used credit responsibly, you benefited from others who didn't. More cars were sold than should have, more houses were built, more profits to more retailers, and of course we were able to utilize all of our exploitation of cheap foreign labor to hold inflation in check.

An economy based 70% on consumption is doomed to fail. We are witnessing that today.

Last edited by jimmyP; 01-03-2009 at 07:20 PM.. Reason: add
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Old 01-03-2009, 08:15 PM
 
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Here's the link http://ichart.finance.yahoo.com/z?s=...ff&z=l&p=s&a=v

That is a pretty startling picture.
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Old 01-03-2009, 08:42 PM
 
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Interesting how it really took off in the Clinton / Gingrich days.

I really am amazed at how the media portrays this as a "lending/credit" crisis when if fact we have a debt crisis that is choking us.
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Old 01-03-2009, 09:58 PM
 
Location: Marietta, GA
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Your not considering that in the late 1970s we begain the transformation from a industrial/manufacturing economy to an information economy. Information technology and the accompanying advances in productivity and wealth were/are real and not a bubble.

Ever read Toffler? Ever hear of the Third Wave?
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Old 01-03-2009, 09:59 PM
 
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I think the boom of the 401k mostly explains this.

401(k) - Wikipedia, the free encyclopedia
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Old 01-03-2009, 10:19 PM
 
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Haven't read Toffler or the Third Wave-- I'll go look them up. Somehow "information economy" sounds hollow. I'd feel more secure if we were producing something someone else could touch. (But I will look up your references....)

The 401k boom idea raises another question in my mind-- what happens when the most physically devastating generation to ever plow through American history decides it's time to retire and cashes out of the 401k's?

I'll read and think. But it still looks awfully like a bubble.
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Old 01-03-2009, 10:57 PM
 
Location: Marietta, GA
7,862 posts, read 15,218,406 times
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Quote:
Originally Posted by cohdane View Post
Haven't read Toffler or the Third Wave-- I'll go look them up. Somehow "information economy" sounds hollow. I'd feel more secure if we were producing something someone else could touch. (But I will look up your references....)

The 401k boom idea raises another question in my mind-- what happens when the most physically devastating generation to ever plow through American history decides it's time to retire and cashes out of the 401k's?

I'll read and think. But it still looks awfully like a bubble.
Think about companies like Microsoft, Cisco, Google, Apple etc. None existed before the late 1970s. Think about the market cap of these companies and others like them and all the spin off and downstream effects of their businesses.

Just because something isn't manufactured in a big factory by a bunch of blue collar union guys doesn't mean that it's less valuable or unimportant. The transition to the Third Wave economy was the most important event of the 20th century, perhaps only behind the atom bomb.
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Old 01-03-2009, 11:06 PM
 
Location: Albemarle, NC
7,730 posts, read 12,936,029 times
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Quote:
Originally Posted by jimmyP View Post
Interesting how it really took off in the Clinton / Gingrich days.

I really am amazed at how the media portrays this as a "lending/credit" crisis when if fact we have a debt crisis that is choking us.
Money inflation (debt) is created by the banking system. Lowering interest rates creates an incentive to borrow money. The one you want to blame is Greenspan and the Federal Reserve.
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Old 01-03-2009, 11:19 PM
 
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Quote:
Think about companies like Microsoft, Cisco, Google, Apple etc. None existed before the late 1970s. Think about the market cap of these companies and others like them and all the spin off and downstream effects of their businesses.
Those companies are not on the DOW but NASDAQ I believe.
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