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Bloomberg
Businessweek says”World
markets are frothing like shaken Champagne, and doomsayers argue that
today’s bubbles need to be deflated now before they get dangerously
large.”
Peter Coy and Roben Farzad
write that the prices of everything from U.S. farmland to cemetery sites in
China have blown far beyond economic fundamentals. The S & P is
trading at 23 times earnings and the historical average is 16. Doug
Noland, who runs the Federated Prudent Bear Fund
fears “this is the granddaddy of them all, an almost-encompassing
bubble right at the heart of monetary systems.”
However the authors point out that Ben Bernanke isn’t concerned
and Janet Yellen hasn’t said a thing about
bubbles, and by the way She said the Fed has nothing to do with commodity
price run ups. “She’s right,” Coy and Farzad contend: “Commodities aren’t being
hoarded, as they would be if investors were speculating on them. Inventories
have fallen since last summer.”
Jaume Ventura and
Alberto Martin of Barcelona’s Universitat Pompeu Fabra are trotted out
with their theory that bubbles are manifested optimism that generate growth, more hiring, investment and higher
prices. “The bubble has costs. But you prefer the world with the
bubble over the one without the bubble,” says Ventura.
CNBC favorite James W. Paulson of Wells Capital Management says
markets are just greed and animal spirits, so bring on the bubbles, otherwise
capitalism will be crushed.
Coy and Farzad write that good bubbles
produce things that survive the crash, like…Amazon? No, they
point to the Apollo space program?
Bad bubbles are like the mania in China for old wine, which only
transfers “wealth to whoever was lucky enough to own the bottles before
the Chinese got interested,” notes Harvard economist Edward Glaeser.
The current tech craze is no bubble, says Bloomberg, because this time
it is different.
Considering whether Justin Bieber (among
other things) is a bubble, Bloomberg provides this anlaysis:
JUSTIN BIEBER
Increase in Bieber’s Twitter followers over
the past year, to almost 9 million: 450%
Why It’s a Bubble: Someone paid
$40,668 for the heartthrob’s hair clippings in a charity auction this
year.
Not to Worry:
L.A. Reid, the head of Island Def Jam, predicts Bieber “will go beyond the teenage puppy-love
thing.”
Bloomberg doesn’t say whether Bieber
is a good bubble or a bad one.
Doug French
Mises.org
Douglas French is president
of the Mises Institute and author of Early Speculative Bubbles &
Increases in the Money Supply. See his tribute to Murray Rothbard.
Article originally published
on www.Mises.org. By authorization of the
author
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