The little bubbles on top of The Big Bubble

Writing yesterday for CBS News, Declan McCullagh, chief political correspondent for CNET, says that the U.S. government is essentially throwing good money after bad trying to revive a bubble-based economy that was “erected on a rickety foundation of debt, leverage, speculation and interest rates held unreasonably low by the Federal Reserve.” (See “You Can’t Inflate a Burst Bubble.”)

McCullagh writes that

Now that the housing bubble, stock market bubble and commodities bubble have popped, the market is trying to adjust to non-bubbly conditions. Laws and regulations that interfere with that process can delay that adjustment and prolong the recession….

We can’t bring back the bubble economy. But until our esteemed elected representatives in Washington figure that out, don’t expect an end to this downturn anytime soon. 

Here at Bubbleconomics, we are exploring the possibility that the bubbliness is much more fundamental and that the entire world civilization is built on an unsustainable collective ambition to achieve affluence.

From that point of view, the recently deflated bubbles in real estate and the stock market were essentially little bubbles on top of one Big Bubble.

AB — 12 March 2009

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