Tiny Bubbles

Historically there have been bubbles. Not simply the Lawrence Welk kind of bubbles, but economic ones have ebbed and flowed throughout American history. The most renowned is the one that preceded the stock market crash of 1929. It caused a certain number of former wealthy people to perform swan dives from open windows. People love the illusion of wealth, status and aggrandizement, but have a problem when delusion is exposed.

In the 1970’s shortfalls in energy created inflated prices that were not only unrealistic but were manipulated by U.S. enemies. The 1980’s me-generation spent like there was no tomorrow on creature comforts, and redefined life in cultural America by standards dictated on Madison Avenue. The 1990’s Generation Xer’s brought us some significant bubbles in the technology sector; specifically the dot-com business. Much of the internet boom was performed with smoke and mirrors as entrepreneur’s extracted money from investors for companies that amounted to little more than a slick website, and stealth, Ferrari driving CEO’s

The 21^st century’s first bubble was the housing boom that began more than a decade earlier. Homes increased in value by hundreds of percentage points. When a modest 10% gain in value over a five year period would have thrilled our parents, the baby boomers came to rely upon unrealistic increases in home values. 300-400% increases over a short decade became the standard and owners viewed it as normal instead of an aberration. Folks began to gobble up homes to flip them for profit. A speculator could put in a little bit of work and that $300,000 home could be sold for $500,000 in a couple of months. Some markets were so hot that owners could list a sale and have a bidding war among numerous buyers. Sellers sometimes ended up with tens of thousands of dollars more than the original asking price. The improbable and unsustainable conditions guaranteed a sale in a matter of days rather than months as had been the traditional model for the housing market in America.

Surprise is a mild understatement to the wake up call many received over the past two years. A more appropriate way to describe it is foreclosure. The real estate market fortunes led to the banking bubble where credit principles were discarded in favor of the gluttonous consumer appetite. Everyone was making money and life was grand for banking and finance. Astute business men offered consumers the opportunity to borrow more than their actual homes (collateral) were worth; far from sound financial practice for both the borrower and the financial institution. Most are going to skate away having the period written off as “glee run-a-mok” instead of prosecutions for the casting off of personal responsibility and shaded deceptions that actually took place.

The latest bubble exists in the energy markets and at this writing the is bursting. Given the weak dollar some of it is understandable, but petroleum is overpriced by about 45%. Instead of $145 per barrel, oil should be about $80. The rest is market manipulation, speculation, hysteria and greed. Then again those are the usual traits that supply the extra hot air to inflate any bubble.

What the next bubble will be no one knows. We can only hope that people wake up. Realize that most things that seem too good to be true usually reveal themselves in time. We could use some level headed thinking instead of the usual emotional frenzy that accompanies these economic anomalies. That however, is as likely as a Lawrence Welk concert without tiny bubbles.