"new" economy is imo a poor attempt at trying to rationalize a perfectly old-fashioned stock market bubble that has come about due to the enormous increase in the money supply under Greenspan.
it is typical that the proponents of this rationalization resort to the supposed non-measurability of what is happening...i repeat, economic output can be measured in dollars, no artificialities are needed. after all we measure the value of the stocks involved in producing all this great new technology also in dollars...they are still businesses that have to produce profits, no matter how many terabytes of information cross the net.
i agree that the net and all those wonderful new technologies are great for consumers and that technological progress has created a host of new industries and opportunities. however, the net erases informational deficits, the basis for profit margins.
another factor conveniently ignored by the new era proponents is time...the day still has only 24 hours.
regarding productivity and how it is measured i recommend reading this article:
grantspub.com
it explains the problems inherent in the way the government tries to measure productivity. note that the prediction made in the report (which was written before the latest productivity data came out) did in fact come true.
we have had investment manias with a backdrop of rapid technological innovation, low inflation and loose monetary policies before...and at their tail end the gurus always show up to explain to us how it's different this time and how the laws of supply and demand have been repealed in the 'new era'.
a look back in history will disabuse one of these notions - the bull market of the 1920's was also driven by technological innovations of great import (electricity, cars, aviation, telephone, radio, mass-manufacturing, are equally, if not more momentous innovations as the ones we have developed in modern times), a loose monetary policy (the credit explosion in the current boom is however many times larger relative to GDP and disposable income) and disinflation. the productivity gains achieved from '21 to '29 were in fact slightly larger than those achieved during the nineties.
but then, the stock market has a tendency to price all these wonderful things into one euphoric moment...that's usually also precisely the moment when we hear that the trees will indeed grow to the sky.
<<the enrichment of stock market values in the face of a hostile Federal Reserve>> that's the key sentence...like others before you you believe that the persistence of the stock market mania is proof of something...all it proves is that there is too much liquidity sloshing about in the system and that we have an open-ended fantasy that helps us deploy it.
that's human nature - it never changes. |
