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I would like to point out that Chile has less regulation than US and fewer bubbles.

• mdasen 18y ago
  So, what is a bubble? I would define a bubble as when we get irrationally exuberant just to come crashing down when reality strikes. Such a bubble could be measured by looking at the up and down of the GDP growth rate. Does that sound fair? The WorldBank actually keeps track of a lot of economic data. So, what does data say? Well, the United States (in the period of 1961-2007) has had fewer bubbles and those bubbles have been smaller. When counting bubbles, I used this methodology: a bubble is a decline in the growth rate of at least 3.5%. When a decline is continuous without a growth of at least 1% in between, it is considered part of the same bubble (so that I wasn't counting several years that Chile had large declines in a row as multiple bubbles). Under that assumption, the US has seen 6 bubbles. Chile, on the other hand, has seen 8. Move that assumption to 4% and the US has seen 5 and Chile has still seen 8. Moving the assumption up doesn't help Chile. Moving that assumption to 2% and the US has seen 7 and Chile has seen 10. Moving the assumption down doesn't help Chile. The facts show that Chile has more bubbles and the bubbles are larger in size. The US bubbles average at around 5% while the Chilean bubbles average around 10%. So, Chile has more bubbles and their bubbles are much greater than the US'. You can see it in a cool chart: http://mda-cxxtx.posterous.com/ http://mda-cxxtx.posterous.com/ A basic look at the chart and you can see that Chile fluctuates a lot more than the US.
  • nradov 18y ago
    GDP isn't a useful way to analyze bubbles. Bubbles are asset price inflation significantly above the trend line.