Things Could Go Better

A market bubble is commonly understood as a large asset segment overvalued by speculation. Speculators in related assets are primarily concerned with reselling to a “greater fool” at a higher price. The underlying assumption is that prices will continue to rise. An expanding bubble of air eventually deflates. Irrationally inflated asset prices must do something similar. As the asset supply becomes excessive, prices drop. Incentives change well before the situation can become a crisis. Price changes communicate market incentives. Misallocated capital must then be liquidated and invested elsewhere. Losses must be rebuilt by alternative employment, savings and investment. That is … Continue reading Things Could Go Better

Turbulent Waters Ahead

American voters will soon participate in a drill to rearrange the deck chairs on their titanic ship of State. Election Day is November 2, 2010. Many are caught up in the idea that a new crew with better ideas will help navigate through rough seas. However, few have recognized the looming economic iceberg of unintended consequences, the unavoidable cumulative result of a drift toward greater command and control by both captain and crew—those past and present. Fundamentally nothing changes in the corporatist managed economy of the United States, including the growing scope of government involvement in the daily affairs of … Continue reading Turbulent Waters Ahead