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Pastimes : The Big Picture - Economics and Investing
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To: John Dally who wrote (626)7/6/1999 12:39:00 PM
From: Arik T.G.   of 686
 
John,

That put a half smile on my face. Really nothing to smile about.
It WILL end in tears. That article used understatement. There was never a case where a bubble didn't end in tears (No, don't bring '87 cause that was no bubble. It was a market hiccup not larger then last year's mini crash). And it looks like AG will leave the job of "addressing the consequences" to his successor. In hindsight it always looks as "something could be done" to amend the aftermath of a bubble burst, but to me it looks very deterministic once a bubble is fully formed- It has to be inflated to its limit. It has to burst. It has to leave depression in its wake.
Euphoria leads to depression, that's the way of the world. In economic terms it's overcapacity and shrinking demand after the leveraged consumption in the overconfident environment brought by an overextended period of growth.
It's 1929 all over again (yes, we're all tired of hearing that). Many excess indicators tell that this bubble is bigger then '29. Maybe the biggest ever. The following depression is bound to be of the same magnitude. There is nothing the Fed can do to "address the consequences". A shrinking economy is a must after the bubble bursts, and the public is the least prepared to a shrinking economy since, well, since a lifetime ago.

ATG
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