Mike,
I think one of the things that throws many economists and investors off is that they fail to realize that with a system of fiat credit you can temporarily distort the free market relationship between savings, investment, interest rates, return on investment, and asset values.
So when they discount a distorted snapshot of inputs they come to "new era" valuation conclusions that make perfect sense under the assumption of a continuation of the prevailing distortion. But that distortion eventually gets removed from the system and equilibrium gets returned. That's why our system works.
In this cycle the prevailing conditions abroad have served to extend and feed that distortion. In addition, the Fed, Treasury Dept., IMF and other central bankers have been working feverishly to avoid facing equilibrium right now. Perhaps it's a timing thing, perhaps they are irresponsible, perhaps they are incompetent, perhaps it's pure politics, perhaps they don't think it's their job to make bubble determinations, but I don't think they disagree.
Lastly, much of Wall St. and corporate America has behaved irresponsibly in promoting the excess for their own short term profit, IPOs, stock options etc... Some may also be taking advantage of "this Fed's" willingness to bail them out.
Combine all this with public ignorance and you get one dooozy of a bubble.
Then again you know all this! <g>
Wayne |
