We've suffered a 'Ponzification' of the economy in recent years, as bubbles have built up and then burst, and each time we act as though it's the first time.
Sentiment: NEGATIVE
Concentrating wealth in the hands of the few and deregulating financial institutions and practices lead to speculative bubbles that eventually burst - and that brings the whole country down.
We escaped the last big bursting of a bubble - the dotcom bubble - with a relatively light U.S. recession. On that occasion, the world economy found its way back on track fairly quickly.
Throughout the '90s and early 2000s, our financial industry and governments leaned on a snake-oil mirage of wealth creation, a bubble predicated on the obvious falsehood that things could only get better.
Having spent 10 years studying emerging markets, I know that you have patterns repeated over and over again. A bubble is like a fire which needs oxygen to continue... when you see there is no oxygen, things change.
In the economy of the cuckoo people that populate central banks, everything is possible. What you have is gigantic bubbles, the NASDAQ in 2000, then the housing bubble and then commodities in 2008 when oil went from $78 to $147 before plunging to $32 within six months.
The entire economy, of course, is locked in a down cycle right now. Last time we weathered this was during another Bush presidency in '90. We were locked in it for a year and a half and everyone came out of it.
For us, whether the market is skewed from a bubble perspective or not really is mitigated by staying focused on what we do best.
What most entrepreneurs don't understand is that it isn't the economy that bursts a bubble, but investor psychology.
What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics.
Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.
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