3 ms·

It is a bubble only if there is an inevitable bursting to be had at a large scale. You see segments of the economy having micro crashes and correcting so I am n

by _8j50 5y ago

It is a bubble only if there is an inevitable bursting to be had at a large scale. You see segments of the economy having micro crashes and correcting so I am not sure. Mass psychology has also changed since '08 smartphones and the internet have evolved a lot. Look at evergrande in China, almost if not bigger than the lehman brothers' crash but China self regulated it. Same with COVID and stimulus. Retail investors are now more powerful too.

foobar2021 5y ago
One could argue stimulus inflates the bubble even more especially if it just goes to wealthy people. The worry there is that it seems to be the only way to prevent a crash; so if there’s another pandemic, war, series of natural disasters fueled by climate change, drought/famine they just print more money and inflate it even more. Just keep pulling the lever until it breaks. Or maybe it never breaks and we should just pull the lever a bunch today and buy our way out of all the worlds problems.
- _8j50 5y ago
  If salary rises along with inflation there is no problem. There is a mass resignation crisis right now as part of that correction, employers who raise pay will do well and the rest won't. People are also finding income outside of traditional employment. My opinion is, bubbles burst when people panic and people panic due to lack of communication. In the past, you wouldn't see places like /r/antiwork or /r/wallstreetbets grab wallstreet's attention for example. The rich keep getting richer but they are also now better informed so that they know just how much carrot to hang on the stick for the poor. inflation is normal, hence so are bubbles. Bubbles bursting means failure of the system to sustain itself.
  - foobar2021 5y ago
    I’d disagree that the only reason people would panic is lack of communication. If you have enough of the events I listed happen I close each other such that the government can’t adequately respond to them, there would be a panic. I guess my point is maybe that we’re in a fragile system rather then a bubble. It’s self sustainable in the steady state (to your point) but if it breaks it’s going to completely collapse and we just have to hope that we never reach the point where it could break. It’s a Similar line of thinking to controlled burns to manage forest fire before they get uncontrollably big. But in the USA at least, the safety net isn’t there to allow for controlled burns in the economy.
stevedewald 5y ago
Evergrande and Lehman Brothers aren’t really comparable. A real estate development company defaulting on its debt means losses for investors, most of which have diversified portfolios and can absorb the loss. $300bn in debt is a lot, so I don’t want to discount how serious that is, but they’re not a bank. Lehman Brothers, on the other hand, was deeply interconnected with the U.S. banking system and touched tens of thousands of businesses. The $600bn they owed were not to “investors” but to businesses, insurance companies and other counter parties that were not prepared to absorb the loss. The prospect of unwinding Lehman’s positions was beginning a catastrophic domino effect on the global financial system. They were quite literally “too big to fail.” Evergrande is just a big company.
- rupert1234 5y ago
  Even further - Lehman had a giant book of derivatives. The counterparts to all those trades woke up to a nightmare - you don't even know what your own book looks like if you don't know what % of your positions with a given counterparty are still valid. Imagine the panic.

by _8j50 5y ago

foobar2021 5y ago

One could argue stimulus inflates the bubble even more especially if it just goes to wealthy people. The worry there is that it seems to be the only way to prevent a crash; so if there’s another pandemic, war, series of natural disasters fueled by climate change, drought/famine they just print more money and inflate it even more. Just keep pulling the lever until it breaks. Or maybe it never breaks and we should just pull the lever a bunch today and buy our way out of all the worlds problems.

_8j50 5y ago
If salary rises along with inflation there is no problem. There is a mass resignation crisis right now as part of that correction, employers who raise pay will do well and the rest won't. People are also finding income outside of traditional employment. My opinion is, bubbles burst when people panic and people panic due to lack of communication. In the past, you wouldn't see places like /r/antiwork or /r/wallstreetbets grab wallstreet's attention for example. The rich keep getting richer but they are also now better informed so that they know just how much carrot to hang on the stick for the poor. inflation is normal, hence so are bubbles. Bubbles bursting means failure of the system to sustain itself.
- foobar2021 5y ago
  I’d disagree that the only reason people would panic is lack of communication. If you have enough of the events I listed happen I close each other such that the government can’t adequately respond to them, there would be a panic. I guess my point is maybe that we’re in a fragile system rather then a bubble. It’s self sustainable in the steady state (to your point) but if it breaks it’s going to completely collapse and we just have to hope that we never reach the point where it could break. It’s a Similar line of thinking to controlled burns to manage forest fire before they get uncontrollably big. But in the USA at least, the safety net isn’t there to allow for controlled burns in the economy.

stevedewald 5y ago

Evergrande and Lehman Brothers aren’t really comparable. A real estate development company defaulting on its debt means losses for investors, most of which have diversified portfolios and can absorb the loss. $300bn in debt is a lot, so I don’t want to discount how serious that is, but they’re not a bank. Lehman Brothers, on the other hand, was deeply interconnected with the U.S. banking system and touched tens of thousands of businesses. The $600bn they owed were not to “investors” but to businesses, insurance companies and other counter parties that were not prepared to absorb the loss. The prospect of unwinding Lehman’s positions was beginning a catastrophic domino effect on the global financial system. They were quite literally “too big to fail.” Evergrande is just a big company.

rupert1234 5y ago
Even further - Lehman had a giant book of derivatives. The counterparts to all those trades woke up to a nightmare - you don't even know what your own book looks like if you don't know what % of your positions with a given counterparty are still valid. Imagine the panic.