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Most bubbles are good, just not for the people who buy in at the top. These tend to be "retail" buyers and so the least able to take the loss. But oh well. T
by mynameishere 17y ago
Most bubbles are good, just not for the people who buy in at the top. These tend to be "retail" buyers and so the least able to take the loss. But oh well.
The recent housing bubble is actually distinguished by its particularly useless allocation of capital. The tech boom gave us a number of healthy companies as well as useful infrastructure. The housing bubble gave us a stock of deteriorating future crack houses.
- jakarta 17y agoTo say most bubbles are good is incorrect. Bubbles depend on whether they are equity or credit-based. Typically, credit bubbles are terrible for economies because they usually start in one area and spread, infecting the entire economy. Equity bubbles on the other hand are usually well contained. When the dot com bubble popped, we didnt have banks collapsing and affecting other businesses.
- btilly 17y agoNot so fast. When the equity bubble collapsed we were near deflation, which the Fed headed off with a generous credit policy that helped fuel the credit bubble. If we had gone into deflation then, that would have been bad. (Not as bad as the cure may yet prove to be, but still bad and not well contained.)