3/30/2024 0 Comments Wild rumpus 2018But your wealth compounds much more slowly at bubble pricing, and your income also falls behind. When farms or commercial forests, for example, double in price so that yields fall from 6% to 3% (as they actually have) you feel richer. What nobody seems to discuss is that higher-priced assets are simply worse than lower-priced ones. To allow bubbles, let alone help them along, is simply bad economic policy. Then, as bubbles break, they crush most of those dreams and accelerate the negative economic forces on the way down. As bubbles form, they give us a ludicrously overstated view of our real wealth, which encourages us to spend accordingly. One of the main reasons I deplore superbubbles – and resent the Fed and other financial authorities for allowing and facilitating them – is the underrecognized damage that bubbles cause as they deflate and mark down our wealth. Even more dangerously for all of us, the equity bubble, which last year was already accompanied by extreme low interest rates and high bond prices, has now been joined by a bubble in housing and an incipient bubble in commodities. equities, and the potential pain has increased accordingly. ![]() But during the year, the bubble advanced to the category of superbubble, one of only three in modern times in U.S. “This time last year it looked like we might have a standard bubble with resulting standard pain for the economy.
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