Here we go again… already?

Posted on | November 12, 2008 | 11 Comments

Last night’s The Daily Show featured an interview with eternal optimist Thomas Friedman. In it, Friedman argues that the way forward is through investment and innovation in the energy industry. He even promotes an “energy bubble,” saying that the infrastructure such a bubble would lay would make the pain of the bubble worth it. While it’s clear that the energy industry is the likely Next Big Thing, whenever I hear folks talk it up, I think about this article from Harper’s last February, “The Next Bubble: Priming The Markets For Tomorrow’s Big Crash,” the thesis of which is that the American economy has become reliant on bubbles, the most recent being technology in the late 90s and housing in the middle of this decade, with energy being the next wave in the next decade.

George Soros, in his recent piece, “The Crisis & What to Do About It”, talks of a “super-bubble” our economy has been in since the move toward deregulation in the early 80s (thanks to both Reagan and Thatcher), which, juxtaposed with the Harper’s piece, suggests why we seem to be in this sequential-bubble-economy. The question seems to be, while energy innovation and investment is valuable, can we do it in such a way to mitigate the inevitable bust?

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11 Responses to “Here we go again… already?”

Gong Szeto
November 12th, 2008 @ 5:17 pm

great post, and i juxtoposed the same references.

i don’t know the answer, but i think that whether or not this recession is prolonged enough for folks to properly sober up or not.
Rob Stuart
November 13th, 2008 @ 3:45 am

George Soros has continued to write and publish essays regarding specific actions that can be taken to address the financial crises. They are available at http://www.georgesoros.com
Trav
November 13th, 2008 @ 10:49 am

If you had purchased any asset (house, stock, commodity) in these early 80s you speak of, you’d have realized a very very good return on it over the past 25 years. (Generally, a better return than most other 25-year periods. Go look.)

What exactly is this financial crisis you’re addressing? I realize your post offers no actual information, but still, define your terms. If your financial crisis is that a lot of assets sell for less than they sold one year ago, then we can all speak more accurately to that particular problem — those of us who care or are journalists or politicians.
peterme
November 13th, 2008 @ 12:04 pm

The financial crisis that pretty much every single economist has called the worst situation our economy has seen since the Great Depression. That one.
BJMe
November 13th, 2008 @ 12:28 pm

Having been raised an atheist by my two children has fostered a natural skepticism toward priestly wisdom, whether in the church or the market place. Funereal perorations by those proclaiming special knowledge of moral mysteries or monetary mysticism are both hollow and tedious and the members of their respective congregations are both misguided and sad.

In the words of my Wife, can’t we all just go shopping?
jz
November 13th, 2008 @ 4:46 pm

@Trav, speaking of precision, I think you mean to say, “if you had purchased *an average* asset of any type” rather than “if you had purchased any asset”, since, obviously, some stocks, houses, etc. are worth significantly less now than they were in the early 80s (eg, shares of InterNorth, which became Enron).

Additionally, the fact that assets today are worth less than they were a year ago is a much bigger deal than you make it sound. These are not in fact assets that most people bought 25 years ago wherein everyone’s simply lamenting the fact they’ve made less profit than they could have if they sold them sooner. These are assets purchased at a year ago’s prices with borrowed money now due. It isn’t that people and insititutions have less money, they have negative money. In a system dependent on credit-backed transactions, that’s indeed a crisis.
peterme
November 13th, 2008 @ 5:19 pm

I also think there’s something to be said that, as I understand it, real income hasn’t moved for much of the American population since 1980.
http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States

So, while the economy may have grown, not everyone has realized the benefits, and yet everyone is being negatively impacted by the downturn.
BJMe
November 13th, 2008 @ 10:51 pm

“Not everyone” in the third clause is not equal to “everyone” in the fourth clause which is, in logic, a false conclusion based only on presumption. Tch tch. Point lost.

The reverse argument is more more reasonable: everyone has benefited from economic growth and not everyone has been negatively impacted by the current downturn.

I wonder how many Americans have less cell phones, iPinds, automobiles, TVs and cable channels, credit cards and real and personal property possessions than they did in 1980, real income a la wikipedia or not. If you look around you will see many more people better of today than they were yesterday. Except in the popular arts. Movies, music and literature suck. If you happened to have developed any qualitative taste before 1980, since then you have been shit outa luck
peterme
November 15th, 2008 @ 9:50 am

“If you look around you will see many more people better off today than they were yesterday.” Perhaps in our moneyed coastal enclaves. I don’t think this is necessarily true of broad swaths of this country. It *is* truer for the world at large, I will grant you that.
Trav
November 15th, 2008 @ 11:57 am

Oh, I believe in a financial crisis. I just asked for a definition the crisis this post is about. The one I see coming has not yet arrived, so we’re probably not talking about that one. I also don’t think the crisis here is that real income hasn’t moved for much of the American population since 1980; that mention has only made this thread more vague.

Thanks, jz, for the summary of what you think the crisis is. It’s important to agree on the problem and what solution is proposed, *before* deciding whether the solution is worth it. You misinterpreted my question; I agree that things are bad, I do think the economy is (and has been) faltering. But people who do not agree on the actual problem, and who petition their government or god simply to “do something”, are at risk of worse problems.

It is quite likely that in ten years, amidst rampant inflation caused by waves of bailouts that are just as exploitable as mortgage securities, we’ll wish we’d simply cut our losses now (accepting these losses as part of the cycle, with apologies to the unfortunate people who went into debt to buy assets at speculative prices at the peak of the market). Do me a favor and consider it.

It’s not like negative money is an unexpected part of the system. I abhor negative money but I’m not the only guy here. We have always had people with negative money, from the consumers that max out credit cards, to the families that buy the house they want, to the small businesses that need SBA loans to get going. (Please note that the negative money isn’t actually realized unless the asset is sold. e.g. nothing bad has happened to the house-buying family unless they actually *sell* their house.) Anyway, since this post started with articles about regulation, who decides which of these negative-money seekers are legal and which are not?

(Yes, of course by “any asset” I meant an average asset, or technically a median asset, although it’s probably also true of 40th percentile assets and almost certainly true of percentiles above 50.)
Asset
July 6th, 2009 @ 11:29 pm

I appreciate with this post. I don’t know more about energy industries. But i agree with Thomos Friedman the energy industries are the big thing in the world.

I have no answer about it but i think the new innovations are encourage the energy industries. But in this recession time the investment in these industries are less in amount.

peterme.com

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Here we go again… already?

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