I don’t really agree with this Post which can identify the true scope of bubbles, but it provides so much food for Thought. Bubbles, taken in their most basic context, are extreme variations in the rate of inflation in the various sectors of the economy; think of them as the shells within that Revolver cylinder I mentioned earlier this Week. Bubbles are the sectors which show the high rates of acceleration, which can be produced by real or artificial factors. Bubbles will burst relatively rapidly if sector prices have been artificially generated, but may not burst at all if the factors generating acceleration of prices are real. The inverse method for examining this process finds the high Costs of Production to be unsustainable in the other sectors of the economy, so that the bubble will drain–not pop! The most adverse circumstance presented by a bubble must be that it ignites inflation elsewhere–that Round being fired in the old Revolver. It is most dangerous when the factors behind the bubble are real–like higher Resource Costs, Resource shortages, or Production delays.
The Reader can find information here about the worst bubble which exists, in both the domestic and world economies. Does One notice the Trick of avoiding rounded numbers to avoid Commentary by the politicians; it is much harder to state that the debt ceiling will be $14.294 trillion, than to say We now have a $15 trillion debt ceiling. Does Anyone expect there is even a debt ceiling at all? We will undoubted find a new ceiling being introduced by Congress before the next Presidential election. Do not doubt Congressional ability to Spend, especially when the Country screams for Stimulus. Here is a bubble which would require a bulldozer with a sharp front blade to prick it.
The Europeans expect they can avoid the hazards of being a super-sized Savior of the World. Americans try to spend their way out of the troubles of the World, while the Eurozone tries simply to ignore awkward economic data which comes in from elsewhere. Both of them have about an equal degree of success. No one ever explains How the fate of Us all rests upon the idiocy that the policy-makers can inspire. I do not know what to propose, as I cannot get finance for my Fallout Shelter–maybe it was the outlined 3-year supply of Scotch. lgl