Bubbles

[RGacky3]

We all know how efficient unregulated Capitalism is at making bubbles, especially when you don't have a goods/services demand growth. Now there are plenty of people talking about plenty of bubbles, Chineese property, Student debt bubble, Gold and/or commodities bubble, even here in Norway people talk about a property bubble (although I don't think so, its probably over priced, but out here it has'nt really been securitized and turned into derivatives, so its not like it would collapse on itself, worst case, prices go down and people loose a bit of value).

Any opinoins on current bubbles, and the effect they might have?

[Blackscare]

Well, I'm paraphrasing here, but somethinsuch somethinston, a financial guy in the federal reserve, was being interviewed about some bit of policy and the interviewer said "This sounds a bit like you're creating another bubble" to which he answered "Yea well, that's sort of the point". I know that that was an horrifically vague thing I just quoted, but I think you get the point. Given the degree to which the world economy, especially in the west, has become financialized, I find it hard to imagine the world capitalist order existing without heavy and increasing reliance on speculative bubbles to create imaginary economic growth.

[kapitalyst]

Funny that all of these bubbles you've mentioned are not caused by "unregulated capitalism", which doesn't exist, but rather central planning failures. Bubbles can (and have) happened in free-ish markets... however, they don't happen very frequently and they aren't this large and devastating. No one is smart enough to centrally plan markets... and every time they try, they cause a crisis.

[Thirsty Crow]

Funny that all of these bubbles you've mentioned are not caused by "unregulated capitalism", which doesn't exist, but rather central planning failures. Bubbles can (and have) happened in free-ish markets... however, they don't happen very frequently and they aren't this large and devastating. No one is smart enough to centrally plan markets... and every time they try, they cause a crisis.
You're commiting an intellectual massacre here, by determining the actions of the FED and cetral banks as trying to impose central planning on the operations of the market. The term is useless if it can be applied to economic operations in USSR and in contemporary advanced capitalsit countries (central banks being the bearers of the function of "central planning").

It would be nice to hear your opinions on the role of the FED in the origin and the consequences of the dot.com crash, though.

[RGacky3]

Funny that all of these bubbles you've mentioned are not caused by "unregulated capitalism", which doesn't exist, but rather central planning failures. Bubbles can (and have) happened in free-ish markets... however, they don't happen very frequently and they aren't this large and devastating. No one is smart enough to centrally plan markets... and every time they try, they cause a crisis.


well total unregulated capitalism does'nt exist, but the more unreguated capitalism is, the more the profit motive takes a large part of the economy, the more booms and busts and the more severe booms and busts you'll have.

Emperical evidence is all over the place, Iceland, post Reagen USA, Argentina, Ireland, its all over the place.

[kapitalyst]

You're commiting an intellectual massacre here, by determining the actions of the FED and cetral banks as trying to impose central planning on the operations of the market. The term is useless if it can be applied to economic operations in USSR and in contemporary advanced capitalsit countries (central banks being the bearers of the function of "central planning").

It would be nice to hear your opinions on the role of the FED in the origin and the consequences of the dot.com crash, though.

What do you think a central bank is for? Centrally planning the issuance, distribution and supply of currency... and now interest rates and more...

Who said anything about the Fed and the dotCom bubble? Hype and over-enthusiasm can create a bubble in practically any market... even in AI development! :(

http://img542.imageshack.us/img542/7608/creditcrunchcereal.jpg

teh yumz!!!11!!!one!11!!11ty!!! :lol:

[Thirsty Crow]

What do you think a central bank is for? Centrally planning the issuance, distribution and supply of currency... and now interest rates and more...
Resorting to bullshit etymological and/or purely semantical "arguments" is always a nice strategy for people who wish to muddy the waters (in this case, you muddying the waters of concrete functions of central banking as opposed to central planning exemplified by the economic practices in USSR).
Again, if you intend to use the term without even slight modifications (and I'd say that to account for USSR and contemporary FED the term would need severe modifications; if it were not found to be practically useless, that is), then I'll have to stick by what I said above.


Who said anything about the Fed and the dotCom bubble? Hype and over-enthusiasm can create a bubble in practically any market... even in AI development! :(

I mentioned this historical occurence with respect to your bold claim that bubbles first tend to result from the operations of regulatory institutions, and then that "they don't happen very frequently and they aren't this large and devastating" in the case of an absence of such causality. I don't even have to say that you didn't provide any explanation, let alone evidence, for these two claims other than the sheer force of assertion.
But you evaded the question: what do you think, why was the dot.com crash comparatively "modest" in scope and impact of its consequences?

[Revolution starts with U]

Notice he said "can happen in free-ish markets, sort-of, but they are not very severe." Free-ish markets? So, are you saying in a "totally free" market, that boom and bust is impossible?

Kappy, kappy, kappy.... Im very dissappointed :rolleyes:

[Thirsty Crow]

Notice he said "can happen in free-ish markets, sort-of, but they are not very severe." Free-ish markets? So, are you saying in a "totally free" market, that boom and bust is impossible?

Kappy, kappy, kappy.... Im very dissappointed :rolleyes:
I can't see why would you be disappointed. From Keynesian orthodoxy to free market fundamentalism - capitalist apologia has always found ways of producing "arguments" which show the imminence of the total abolition of all antagnonisms of capital - within the framework of capital. They wouldn't have a reason to exist (in the professional sense of the word :D) if they didn't do so.

[CommunityBeliever]

Funny that all of these bubbles you've mentioned are not caused by "unregulated capitalism", which doesn't exist, but rather central planning failures. Bubbles can (and have) happened in free-ish markets...I have never found any evidence that unregulated markets are more economically efficient then controlled markets as exemplified by modern China, or that it is at all desirable to move government organisations like the FDA and the HHS to the private sector. In this sense you could actually call me a "statist."

In reality though I am not a statist because I want I am working for is a anarchist / communist / technocractic society that uses post-scarcity technologies and open colloborative design (see adciv (http://www.adciv.org/Main_Page)).

[RichardAWilson]

http://static.technitrader.com/images/courses/oe20/peek-inside/history-insert-2.jpg


Capitalism can even turn a flower into a speculative bubble.


During the peak of Tulip Mania, one low-grade bulb could purchase over 12 acres of land.



By 1635, a sale of 40 bulbs for 100,000 florins (Dutch guilders) was recorded.

(According to the International Institute of Social History, one florin had the purchasing power of €10.28 in 2002.)

[#FF0000]

It's almost funny until you realize that these speculators are driving up gas prices and are making food too expensive to buy in Africa.

[Bud Struggle]

There are always bubbles in economics. Hell, Cuba is having a entrepreneaur bubble right now.

[The Teacher]

Gold is the next one. The people who bought at $400 an ounce have already sold it and "invested in cash." People are getting priced out of the market as we speak. The bubble has inflated we're just waiting for the pop. People who bought in at anything higher than $1000 an ounce are going to lose their shirts.

Bubbles happen. The .com bubble was caused by people pouring money into something they knew nothing about. They just saw someone else make a profit so they wanted to be jonny-come-lately. All that money drove stock prices to stupid levels and fueled the bubble. At the end of the day someone realized that he had dumped 100 million into four nerds and a server with no product or even a coherent plan.

My profs at Antioch saw the whole thing coming over a year before it happened, same with every business person and computer geek I knew.

Google south park and underwear gnomes if you want a better understanding.

[RGacky3]

There are always bubbles in economics. Hell, Cuba is having a entrepreneaur bubble right now.

... You can't be this stupid.


Gold is the next one. The people who bought at $400 an ounce have already sold it and "invested in cash." People are getting priced out of the market as we speak. The bubble has inflated we're just waiting for the pop. People who bought in at anything higher than $1000 an ounce are going to lose their shirts.

With Gold you have tons of different derivatives, thats when you see a problem, a baseless jump in price combined with securitization.

[kapitalyst]

Notice he said "can happen in free-ish markets, sort-of, but they are not very severe." Free-ish markets? So, are you saying in a "totally free" market, that boom and bust is impossible?

Kappy, kappy, kappy.... Im very dissappointed :rolleyes:

No, I'm saying there's no such thing as "totally free" markets. So I cannot comment on what has been happening in them. :)

Bubbles can (and do) happen in any type of economy. They aren't even restricted to economics. Think about some childhood fad from grade school that reached an amazing peak of popularity before it became labeled "gay". :lol: It is exactly that social force which creates bubbles. They become much worse and more devastating in markets, however, when exacerbated by market and currency manipulation policies (e.g., Great Depression and 2008).

@ Menocchio:

Nice two paragraphs, but the fact remains that central banking exists for central-planning of the monetary system. This cannot be disputed.

@ The Teacher:

Gold isn't, and never was, a bubble. The actual bubble is essentially an upside-down bubble... and you can find it in your wallet.

Don't expect gold prices to fall into the red unless we have a massive credit crunch and global economic shrinkage -- resulting in widespread liquidation of all risk assets, weak demand and high demand for cash. As of now, gold is still in good shape. Up over 25% YTD. Everyone who bought it over $1000 is laughing all the way to the bank. Gold has a long way to go (easily $2500+) if monetary and fiscal policy is not fundamentally reformed.

@ Gacky:

Don't call Bud stupid because you don't agree with him... very dickish move on your part. :thumbdown:

[Thirsty Crow]

@ Menocchio:

Nice two paragraphs, but the fact remains that central banking exists for central-planning of the monetary system. This cannot be disputed.

Central planning is not a fact, but a concept, with its history of use. You didn't provide any reason for abandoning the well established use ('cause you'd be forced to affirm your ideological bias which results in obscuring the real function and workings of central banking).

Oh yeah, and still no input from you on anything else than semantics, say, concrete history of the financial system in the form of one of its "nodes" - the dot.com crash? Is that an affirmation of total lack of knowledge or do you only want to deflect discussion from such an unpleasant topic for a market fundie such as yourself?

[kapitalyst]

Central planning is not a fact, but a concept, with its history of use. You didn't provide any reason for abandoning the well established use ('cause you'd be forced to affirm your ideological bias which results in obscuring the real function and workings of central banking).


Central planning redirects to...
Economic planning: (http://en.wikipedia.org/wiki/Economic_planning)
...refers to any directing or planning of economic activity outside the mechanisisms of the market (http://en.wikipedia.org/wiki/Market), in an attempt to achieve specific economic or social outcomes.

That is precisely what central banks do... The fact that you still want to dispute this is, to me, rather amusing... :rolleyes:



Oh yeah, and still no input from you on anything else than semantics, say, concrete history of the financial system in the form of one of its "nodes" - the dot.com crash? Is that an affirmation of total lack of knowledge or do you only want to deflect discussion from such an unpleasant topic for a market fundie such as yourself?

WTF are you even talking about? :confused:

The dotCom crash was predominately a market phenomena. Bubbles happen. No one said markets are 100% perfect and never have recessions, bubbles or problems.

[RichardAWilson]

Bubbles can (and do) happen in any type of economy. They aren't even restricted to economics.

I agree. However, regulations and controls can prevent the animal spirits from running wild. Those policies worked during the 1940s, 1950s and 1960s. We didn't have a bubble for over three decades. It was until deregulation began (in the late 1970s) that bubbles started forming again (I.e. Housing Bubble, Savings and Loan Crisis, Bond Market Bubble, .Com Bubble, Housing Bubble, Commodities Bubble).

Hell, we had more bubbles during the "Me Me" 80s than we had from 1940 to 1970. Meanwhile, the economy soared from 1940 to 1970 (growing much faster then it did from 1980 to 2010). The 60s should have saw a bubble.

Nonetheless, the Woods System and Post-War Financial Regulation in Banking prevented a bubble from forming.

[kapitalyst]

I agree. However, regulations and controls can prevent the animal spirits from running wild. Those policies worked during the 1940s, 1950s and 1960s. We didn't have a bubble for over three decades. It was until deregulation began (in the late 1970s) that bubbles started forming again (I.e. Housing Bubble, Savings and Loan Crisis, Bond Market Bubble, .Com Bubble, Housing Bubble, Commodities Bubble).


So the solution to curtailing the excesses of the "animal spirit" is appointing other animals to dominate the animals? Reigning in capitalism requires appointing other capitalists to oversee them? Then we call it "government", and it all magically works? :blink:

Housing bubble was caused by government...
Savings and loan crisis? Government...
Bond market bubble? Government...
Commodities "bubble"? Government...
dotCom bubble? The market...

Final Score:
Government: 4
Market: 1

You're also wrong about these time periods in your views on how good/bad the economy was doing -- and I suppose this is because you're ignoring (or don't notice) the myriad of factors which are part of the tale.

Our "growth", in dollar denominated terms, also looks much better on paper when not accounting for real inflation. If the dollar was devalued 50% tonight, prices would promptly double. Then you might look at my balance sheet next year and assume my revenue jumping from $4,000,000/yr to $6,500,000/yr was actually "growth", when it was in fact a loss of revenue.



Hell, we had more bubbles during the "Me Me" 80s than we had from 1940 to 1970. Meanwhile, the economy soared from 1940 to 1970 (growing much faster then it did from 1980 to 2010). The 60s should have saw a bubble.

Nonetheless, the Woods System and Post-War Financial Regulation in Banking prevented a bubble from forming.

Financial bubbles are much less likely to occur when there is some notion of hard currency or some attachment to a real asset (e.g., gold or silver).

[Revolution starts with U]

I mean like... major crash every 20-30 years in the era of hard currency.
... 1 major crash in 70 years under the fiat system...

Am I wrong in this view?

[kapitalyst]

I mean like... major crash every 20-30 years in the era of hard currency.
... 1 major crash in 70 years under the fiat system...

Am I wrong in this view?

Yes. For one, check out the history of the US dollar. Two, how about Nixon (http://en.wikipedia.org/wiki/Nixon_Shock). ;)

Also, modern markets would be more stable compared to those of the past if they both had the exact same monetary system. This must be considered in the comparison. Yet we still have major financial crises over and over again... 2008 being the worst since the Great Depression.

What you'll see someday, if we continue on this path, is that we never truly recovered from all the crises we've had. We've just postponed them, essentially... and we owe. Inflating and borrowing your way out just digs your grave deeper. The day has to come when the bills are due...

[RGacky3]

Don't call Bud stupid because you don't agree with him... very dickish move on your part. http://www.revleft.com/vb/bubbles-t162416/revleft/smilies2/thumbdown.gif

No I'm calling him stupid because he said Cuba has an entrepreneaur bubble, which is a stupid stupid thing to say.

[#FF0000]

What you'll see someday, if we continue on this path, is that we never truly recovered from all the crises we've had. We've just postponed them, essentially...

This is absolutely true. I remember David Harvey made a similar point, I think, in one of his talks, saying "capitalism doesn't solve its crises: it just moves them around geographically"

[kapitalyst]

No I'm calling him stupid because he said Cuba has an entrepreneaur bubble, which is a stupid stupid thing to say.

As I've said before, Gacky, there's a BIG difference between saying:

"I think that's a stupid idea..."

--or--

"You're fucking stupid!"

I still say... quite bad form. Bud didn't say or do anything aggressive or insulting toward you, bro. You just called him stupid for no reason.

[RGacky3]

I still say... quite bad form. Bud didn't say or do anything aggressive or insulting toward you, bro. You just called him stupid for no reason.

Reason being he said a stupid thing, and its not the first time.

[kapitalyst]

Reason being he said a stupid thing, and its not the first time.

And some would say to you: "Likewise"... Yet we're not calling you names... It would be too easy to just apologize to the man and refrain from insults, I suppose... :rolleyes:

[RedGrunt]

Housing bubble was caused by government...which is dominated by Capitalists.*
Savings and loan crisis? Government...which is dominated by Capitalists.*
Bond market bubble? Government...which is dominated by Capitalists.*
Commodities "bubble"? Government...which is dominated by Capitalists.*
dotCom bubble? The market...which is dominated by Capitalists*

Corrected.

Final Score: Capitalist=5

[Bud Struggle]

As I've said before, Gacky, there's a BIG difference between saying:

"I think that's a stupid idea..."

--or--

"You're fucking stupid!"

I still say... quite bad form. Bud didn't say or do anything aggressive or insulting toward you, bro. You just called him stupid for no reason.
Thanks. Heaven knows, Gack has his "issues."

[Bud Struggle]

Reason being he said a stupid thing, and its not the first time.

Comrade, Brother. You are living in a deluded universe. Really.

[Jose Gracchus]

Funny that all of these bubbles you've mentioned are not caused by "unregulated capitalism", which doesn't exist, but rather central planning failures. Bubbles can (and have) happened in free-ish markets... however, they don't happen very frequently and they aren't this large and devastating. No one is smart enough to centrally plan markets... and every time they try, they cause a crisis.

How was the tulip mania in the Netherlands circa 1600s caused by 'central planning failures'?

[Bud Struggle]

... You can't be this stupid.


No. Entreprenurship is the new Cuba. Fidelism is dead. People are just getting prepaired for the Miami takeover.

It's comming. And it's going to be good. :)

[RGacky3]

No. Entreprenurship is the new Cuba. Fidelism is dead. People are just getting prepaired for the Miami takeover.

It's comming. And it's going to be good. http://www.revleft.com/vb/bubbles-t162416/revleft/smilies/001_smile.gif

Thats not a bubble, look up what the word bubble means in economics and come back.

[molotovcocktail]

This is how bubbles occur:

Humans tend to think that "if that guy made a lot of money on tulips, why should not I get rich on tulips too?",
as a result of this, many invest in this object.This creates an increase in demand.
When the demand increases, the prices increases. The price will then rise higher than the actual value of the object, because higher amounts of an object are being bought than the amount of objects being consumed. The demand get to an unsustainable height.
At some point the prices get a fall. When the price fall, investors panic and start selling their investments. This reduces the price more, and the bubble bursts.

Can somebody tell me what this got to do with a centralized economy?

[Revolution starts with U]

I rather like this HMBCT; Herd Mentality Business Cycle Theory. :lol: And it rightly puts the government on the same footing as the market in their respective roles of destroying the economy.

[The Teacher]

This is how bubbles occur:

Humans tend to think that "if that guy made a lot of money on tulips, why should not I get rich on tulips too?",
as a result of this, many invest in this object.This creates an increase in demand.
When the demand increases, the prices increases. The price will then rise higher than the actual value of the object, because higher amounts of an object are being bought than the amount of objects being consumed. The demand get to an unsustainable height.
At some point the prices get a fall. When the price fall, investors panic and start selling their investments. This reduces the price more, and the bubble bursts.

Can somebody tell me what this got to do with a centralized economy?

Nothing. Somehow having a central bank makes people invest money into .com stocks or hide gold coins in their basements.

[RGacky3]

Can somebody tell me what this got to do with a centralized economy?

Nothing, its just market fundementalists cannot fathom that capitalism simply does'nt work, so they try and find some boogieman and pin the failings on that, dispite not having ANY evidance or any cause and effect.