(The question extends well beyond climate policy; as I did the other day, I encourage you to listen to a great recent discussion
of financial bubbles and busts on Leonard Lopate's radio show.)
International investors play the markets to realise added value, and in this way take part in the creation
of financial bubbles.
«We are replaying an age - old storyline
of financial bubbles that has been played many times before,» he concluded.
The company's chief financial officer recently took an even firmer stance that cryptocurrencies are volatile, speculative ventures, operating unregulated, in the grips
of a financial bubble.
Admittedly the heads of the world economy are also becoming worried as they take stock of the situation, and face up particularly to the presence of the Asian tigers, the irrational growth
of the financial bubble and the extreme poverty in the world.
Economist Hyman Minsky «s 1996 «Financial Instability Hypothesis» highlights five points in the life cycle
of a financial bubble:
Not exact matches
Before the
financial crisis, most every economy was doing well, albeit on a
bubble of debt and inflated asset prices.
The challenges facing the five men's successors, all chosen from within, include basement - dwelling interest rates, an ever - growing housing
bubble, and the threat
of disruption by
financial technology upstarts.
That includes the great recession
of 1980 to 1982, the stock market crash
of 1987, the Russian Ruble crisis
of 1998, the tech
bubble of 2000, and the
financial crisis
of 2008.
The U.K. takes it so seriously that it invested the Bank
of England with the power to deflate any asset - price
bubbles that it identifies as threats to the
financial system.
In January 2009, both The Wall Street Journal and Forbes cited Paul as one
of the few who identified early on the formation
of the housing
bubble and the economic and
financial market havoc that would ensue after the
bubble inevitably burst.
According to UBS, certain cities have seen prices rise at rates that are potentially not sustainable - and eight
of these
financial centers are at risk
of having real estate
bubbles that could eventually deflate.
Three
of us started the company, we were first time software entrepreneurs, we were starting in a difficult environment in late 2000 when the Internet
bubble had burst, we couldn't get funding, we were working without salaries and having no
financial cushion... but almost in a linear fashion it just got better and better: more momentum, more customers, better culture, better technology.
And though WeWork became profitable as
of summer 2015, some skeptics believe that its
financials may not support its valuation, suggesting it could be part
of a new technology
bubble.
On March 28, after a seven - year investigation, the RCMP's commercial crime section filed criminal charges against three
of the firm's principals: former CEO Daniel Potter, who built the software developer into a TSE - listed firm with a market value
of $ 100 million at the height
of the dot - com
bubble; Halifax securities lawyer Blois Colpitts, 48, a former director and the firm's legal adviser; and Bruce Elliott Clarke, a 65 - year - old former broker with National Bank
Financial.
Too many
of us techies today live in an insulated and isolated world that is basically a shiny, buffed - up
bubble that completely ignores the day - to - day concerns and
financial realities
of the people who inhabit most
of the world.
Two years ago, when Greater Vancouver houses were selling for an average
of just $ 1 million, Porter dismissed talk
of a Canadian housing
bubble by declaring that ««
bubble» is perhaps the most overused word since the global
financial crisis.»
Over the last few years, China's debt - to - GDP has ballooned to more than 300 percent from 160 percent a decade ago, causing many people, including Chinese officials, to warn
of a
financial - sector debt
bubble that's waiting to burst.
A cut Wednesday would leave the benchmark rate near its effective floor, reducing the central bank's flexibility to deal with the elevated risk
of financial turmoil from Europe's vexed relationship with Greece or China's stock - market
bubble.
At the same time, Burry, who made a fortune in last decade's
financial crisis by betting that the housing
bubble would burst, is also gaining a following north
of Hollywood, as a Silicon Valley tech investor.
Efforts to make complex
financial functions a part
of Bitcoin have been
bubbling through 2013, but 2014 will see them come to fruition.
That's the smallest
bubble I've ever seen relative to the scale
of other
financial crises.
«We are in the throes
of a burgeoning
financial bubble,» Jones said.
The housing
bubble in the United States, which triggered the
financial crisis in 2008, had highlighted the danger
of using the
financial system to make up for the failures in social policies.
According to UBS, certain cities have seen prices rise at rates that are potentially not sustainable — and eight
of these
financial centers are at risk
of having real estate
bubbles that could eventually deflate.
... The lenders with their teams
of financial analysts absolutely knew that they were creating and continuing to lend into a
bubble.»
So this first line
of explanation stresses the factors that are common to all
financial bubbles — in particular the combination
of cheap credit and a general increase in the appetite for risk.
The Congressional Budget Office defines asset
bubbles as: «An economic development in which the price
of a class
of physical or
financial assets (such as houses or securities) rises to a level that appears to be unsustainable and well above the assets» value as determined by economic fundamentals.
MH: The
bubble of the 1990s has been called a dot.com
bubble, an internet
bubble and other forms
of technological
bubble, but technology was only a vehicle for what basically was a
financial bubble.
A big storm can escalate into a hurricane through sudden shifts in wind and pressure just as an economy can tumble into recession when a
bubble bursts because
of financial vulnerability.
It was almost as if the Spanish operators had read one
of the biographies
of Ponzi that began to appear as observers noticed the common denominators between the global
financial bubble of the 1990s and earlier
bubbles.
The aim
of bank marketing departments — backed by the Obama administration — is to steer credit to re-inflate the
bubble and thus save
financial balance sheets from their current negative equity position.
The «search for yield», i.e. for better return on
financial investments than the declining interest rate, thus led to the series
of bubbles & bursts: deregulated savings & loans (immediately), high - tech stocks (late 90's), mortgage derivatives — > house prices (2000's).
The
financial sector, large and small, is doing great in terms
of profitability (and that's before all their goodies in the tax cuts), credit is freely flowing, and while there's always speculation afoot in
financial markets, there are no large and potentially destabilizing credit
bubbles.
It also helped the economy in 2008 when global risk aversion was at its peak, and during both the Asian
financial crisis in the mid to late 1990s and the bursting
of the tech
bubble in the United States a decade ago.
It was in Kindleberger's book that I also first learned about the impact
of the Franco - Prussian War
of 1870 - 71 and the subsequent reparations payments on global
financial markets (which I discuss extensively in a February blog entry) and in unleashing the final stage
of a global liquidity
bubble that ended with the various panics
of 1873.
Many voters believe that a
financial bubble enriches the economy rather than turning the surplus into a flow
of interest and banking fees.
The essence
of the global
financial bubble is that savings are diverted to inflate the stock market, bond market and real estate prices rather than to build new factories and employ more labor.
Yet from our perspective, bitcoin has serious flaws: its trajectory resembles a textbook case
of a
financial - market
bubble, and it is lacking several key qualities that would qualify it as a currency.
But despite all this, the important thing is that the real estate
bubble would have developed in any event, simply because
of the exponential
financial dynamics at work and the increasing tax favoritism for real estate — taxing labor and industry rather than land rent.
Once again, there is minimal demand for autos and housing, and that is partly because the market is still saturated with both
of these credit - sensitive big - ticket items after an unprecedented credit and consumer
bubble that went absolutely parabolic in the seven years prior to the collapse in the
financial markets an asset values.
Presently, market conditions are most consistent with a «blowoff» to complete the extended top - formation
of the third
financial bubble in 16 years.
In the most recent case
of financial intrigue
bubbling up following the leak
of the Paradise Papers, an investigation by the CBC and the Toronto Star uncovered evidence
of a multi-million dollar ticket scalping operation that StubHub not only permits but incentivizes.
It may promote a
financial bubble but at the cost
of austerity for consumption and direct investment.
Just as real estate lending fuels land speculation, so the withdrawal
of such credit leaves property markets to decline, sometimes with a crash, as occurred in Japan after 1990 when its
financial bubble burst.
The first set
of costs stems from the risk that the current monetary policy regime could distort asset allocations and lead to renewed
financial asset
bubbles.
It is true that the housing
bubble caused more damage because it was a debt
bubble vs. an equity
bubble, and that caused a bigger
financial problem because banks and shadow banks were more financially exposed to the equity losses
of the housing
bubble (equity based upon debt x 10).
However, I think we need to look deeper at the cause
of financial stress with each
bubble if we're actually interested in inequality.
The dot - com
bubble of 2001 is another black swan event that has similarities to the 2008
financial crisis.
«Preventing new speculation acrobatics and formation
of bubbles is primarily the responsibility
of the
financial sector,» he declared.