It's funny how people keep trying to define something by using the thing itself as a definition.
Look, I haven't denied that bubbles occur or exist. I simply said that they aren't easily defined.
Marxists call for the outright abolition of speculation because it can create "imbalances". Unfortunately, imbalances are precisely what make capitalism the efficient tool of wealth and value creation that it is. If everything were always in balance, and static, there would be no profits, no wealth creation, and investing would be meaningless.
Speculation can indeed lead to imbalances, but they are necessary for the proper functioning of markets since it acts as the "grease" for the "gears". It provides liquidity and markets at points in time when few are available.
Venture capitalists are speculators. Yet nobody denies the need for them. Futures traders are speculators, but nobody denies the need for them. The list is endless.
Sometimes speculators get caught with their pants down...and sometimes alot of them have their pants down.
How come nobody has focussed on my other point, from the Economist? That PE ratios rose wildly during the 20's, fell drastically after the crash, but never went back down to the levels prior to the crash?
It is likely that the same scenario is, or can happen, here, for many of the same reasons. |
