When will the next bubble burst?

[ComingUpForAir]

http://www.youtube.com/watch?v=4ECi6WJpbzE

...and if it's as big as the last one.. - which by the way is the one that is the root cause of me studying Marxism and becoming a marxist myself - could it be the next step towards revolution? The next bubble is Global - the 'stimulus bubble'... there is plenty in this doc I don't understand, but I appreciate it all the more for that reason. What is your view? The next boom and bust are coming...

The cycle of this recovery, in the absence of government spending and taxes on the rich (above 70%) -- is everyone taking a huge hit, getting nickel and dimed like mad, accepting lower wages, prices of goods falling an eventually getting bought up, smaller companies getting further bought up, and eventually.. etc...till another boom occurs..

[Art Vandelay]

I'll link this to workers control over prod, cause he seems to be a pretty good source when it comes to economics. However I must say, as socialists, we can't simply sit around and wait for revolution to be caused by economic collapse; capital is insanely resilient and will bounce back if the proletariat doesn't have its shit together.

Edit: Fuck never mind, I thought it was workers control of prod who I was thinking of, but maybe it wasn't. Pretty sure the person I saw post a bunch of shit on economics and predictions for the next six months was from Germany. Sorry their user name has completely slipped my mind, maybe they'll see this though.

[Prof. Oblivion]

Okay so, the thesis of the documentary: So this is claiming that the fed lowering interest rates through the 2001-2007 period (up until the crisis) are what caused it.

Claim #1: Greenspan and the Fed's lowering of interest rates caused a bubble which caused the crisis.

Problem: Interest rates are not something simply dictated by the Fed. The Fed doesn't have some kind of "interest rate lever" where they can just set the interest rate at whatever they want and watch the results play out. The Fed affects interest rates through open market operations, which has an effect on the interest rate but does not directly control it.

What else affects the interest rate? Savings. When savings increases in the short term, the interest rate decreases. Why? Because saving is effectively taking money out of circulation. Basically, when you save, you are temporarily "destroying" money. So if savings goes up, the money supply decreases, and the interest rate does as well.

We can see this phenomenon play out because the money supply is tracked.

Second, looking at interest rates alone never tells the whole story. We need to also look at inflation, as a resultant of Fed policy and the interest rate:

http://cdn.theatlantic.com/static/mt/assets/business/2001CPI.png


If Greenspan's policy had been wildly inappropriate, inflation should have shot up like a rocket. Instead, after flirting with deflation in 2003, prices settled within shouting distance of the Fed's then-unofficial 2 percent inflation target. Nominal GDP tells the same story (http://research.stlouisfed.org/fredgraph.png?g=5wW). The Fed basically had interest rates where they belonged, even though -- huge caveat -- housing prices went up by an epic amount.

Source (http://www.theatlantic.com/business/archive/2012/03/happy-birthday-alan-greenspan-the-housing-bubble-wasnt-your-fault/254089/#)

Third, blaming the Fed for the crisis completely ignores the fact that the housing bubble was a global phenomenon.

Claim #2: Easy access to credit was pushed by both the left and the right for the purposes of securing homes to low income home buyers.

Problem: This is true. I don't think it is appropriate, though, to paint it as some kind of conspiracy to extract money from poor people, though some did do this. Home prices were rising rapidly, and had not declined in decades (I believe since WWII). A home was viewed as a "sure bet" based on past performance, and so owning a home was seen as a valid way to "lift up" people who couldn't otherwise afford them and use them to secure and build wealth.

Fannie Mae and Freddie Mac were created for this purpose, the idea being that we can get more people in homes if the government is underwriting and guaranteeing the loans.

Now, this all seems rosy and great, and that's not the reality either. The reality of a bubble is that they get a life of their own, and are "ridden" by those who are contributing to the problem. Easy access to mortgages, the underwriting of loans by the government, this all was done on the basis of the belief that a home is an asset that appreciates over time. In the same vein, banks started handing out loans to people, for the same reasons. Predatory lending, a small subset of these loans, was done in a culture of ever-rising home prices, extremely easy access to credit, and using that to loan officers' advantage to increase their commission. Everyone was "riding the bubble," so to speak.

The claim "The US got out of the dot com crisis by inflating a new bubble" is the height of stupidity because it is based on the conspiratorial premise that the government was fully aware of and complicit in the creation of the bubble. This is asserted about a minute after clips showing Bernanke as late as July 2007 claiming that there was no imminent crisis. So which is it? Was the government complicit in creating this vast conspiracy or were they clueless in the face of the obvious? You can't have it both ways.

That's about all I've got, I got like 20 minutes in and can't stand to watch any more of this shit. This is a rather poorly done documentary from a free market libertarian perspective on how the crisis happened. There are better documentaries on this (Inside Job, I think? Is that right?).