Booms, Manias, Windfalls and Die-Offs
Of Two Minds
05 Giugno 2009
Perhaps financial booms and busts share characteristics with windfalls and the resulting die-offs.
Longtime correspondent Michael Goodfellow mades these astute comments about booms and busts from a perspective I would characterize as sociobiological:
I was thinking about financial booms and busts the other day. I think we both believe that crashes are just the price of bubbles. Which is why I'm suspicious of any statement that the 1929 stock market crash "caused" the depression. The crash was just the end of the bubble, and the depression was the prolonged unwinding of excess debt and poor investments. Prolonged by government attempts to reflate the bubble, among other things.
So the real problem here isn't unwinding debt and so on. We know that happens eventually. Systemic effects (dominoes crashing into one another) are important, but overrated in my opinion. The real problem is manias and bubbles. …
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