The Bubble Economy: Where we are & how we got here...

[debbierlus]

A great article about the converging factors creating our current fiscal mess. It is long, but worth the read.

http://www.prospect.org/cs/articles?article=the_bubble_economy

[Bok_Tukalo]

1. Tulipmania

Sometimes, History refuses to repeat itself and just slaps you and says, "didn't you hear me the first time?"

[ben_meyers]

2. "Irrational enthusiasm"

The business cycle is dead: Growth could go on forever!

Boom and Bust, and nobody learns.

[Make7]

3. Is he saying that deregulation is one of the primary causes of the current problems?

Communist bastard! :sarcasm:

Thanks for posting, that was worth the read.

It's remarkable how many examples of the failure of deregulation there are, and still too many people seem to not understand the correlation.

- Make7

[debbierlus]

5. It is a good article to explain the basics

I don't understand the American or Global economic system, so it was great it started each topic with a description.

A Hedge Fund is...(for example).

I am going to read it again, I couldn't take it all in on the first read. Best one I have found so far to explain the complexities of the current situation, in reasonably understandable language.

[Make7]

6. I would imagine the people running LTCM thought they understood...

... the economic system. That was largely disproven when Long Term Capital Management failed spectacularly in 1998. It is unfortunate that the failure of LTCM, which had been started and run by some of the best and brightest in the investment field, was not seen as more of a warning sign to the regulators and regulatees in the financial sector.

Frontline did an episode on LTCM called the Trillion Dollar Bet many yeas ago. It isn't available for online viewing, but they have a website with the transcript and other useful info.

MERTON MILLER: Models that they were using, not just Black-Scholes models, but other kinds of models, were based on normal behavior in the markets and when the behavior got wild, no models were able to put up with it.

ROGER LOWENSTEIN: Although their models told them that they shouldn't expect to lose more than 50 million or so on any given day, they began to lose 100 million and more, day after day after day till finally there was one day, four days after Russia defaulted, when they dropped half a billion dollars, 500 million in a single day.

NARRATOR: In Greenwich, LTCM faced bankruptcy, but if the company went down, it would also take with it the total value of the positions it held across the globe - by some accounts $1.25 trillion, the same amount as the annual budget of the US government. The elite of Wall Street would suffer heavy losses. The Federal Reserve Bank called upon the world's top financial regulators to discuss the crisis.

ROGER LOWENSTEIN: Suddenly they seemed to be staring at this nightmare where one firm linked up to every major firm on Wall Street was going to be seized up and markets might just stop working. That was the great fear.

http://www.pbs.org/wgbh/nova/transcripts/2704stockmarket.html

I was hoping that this thread would generate more interest, the article that you linked to really should be required reading for those wanting more information on how things got to this point.

Sometimes it helps to include an excerpt of the article to entice people to click on the link. Sometimes it doesn't....

- Make7

[Thickasabrick]

4. The housing bubble got us out of the dot.com bubble burst....what

will be the next bubble? Or does that mean we are bubbled out?