GrimUpNorth Posted May 23, 2006 Share Posted May 23, 2006 We all know the bad side of commodity/stock market/housing bubbles, but what are their good points? The Dot Com Bubble helped to bring in loads of investment into the Internet and brought advances at great speed, which in my view would not have happened without the sheep mentality throwing loads of money at it. In the future the Housing Bubble may have helped create new and cheap homes for low earners (once the BTL's are forced to sell); admittedly rubbish luxury flats, but better than nothing. The possible Commodity(oil) Bubble makes industry cut costs and find more efficient and inventive ways of using resources, leading to research investment and less global destruction. Going to war - leads to bubbles in arms spending which leads to spin offs for research. Much of our technology today was based on military development. Not that I advocate breaking international law. The Health bubble, pharmaceuticals are making a killing at the moment, but will this bubble burst once the demographics have evened out (ie all the baby boomers have kicked the bucket), thus advances in medicine will then decrease. My own sector, Science, see's lots of bubbles on about a 5 to 10 year cycle, some areas get thrown lots of money for a while, then another area becomes popular and you just follow the money. The downside is that you may lose some valuable experienced people, however it stops researchers becoming fixed in their ways and there may well be a useful crossover where techniques in one field can be applied in another. Could a nice stable non-bubble market economy produce the speed of advance we are seeing, or do we need bubbles and hence the inevitable ups and downs in house prices? GrimUpNorth Quote Link to comment Share on other sites More sharing options...
grim up north Posted May 23, 2006 Share Posted May 23, 2006 like the name...... Quote Link to comment Share on other sites More sharing options...
Magpie Posted May 23, 2006 Share Posted May 23, 2006 Could a nice stable non-bubble market economy produce the speed of advance we are seeing, or do we need bubbles and hence the inevitable ups and downs in house prices? I think there's an element of truth in this, even though bubbles harm as many people as they profit. It relates also to the whole gold vs fiat debate as well. Gold enthusiasts point out that a gold-backed currency would be totally stable and not suffer from inflation. But historically the lack of flexibility was also a problem as it made it hard to raise capital for investment in major projects. So lending, issuing of bonds, fiat currency, are introduced and increase the liquidity of the economy. These allow for major investment, industrial progress, and encourage an entrepreneurial spirit. But they also allow inflation, bubbles, frauds and so on. It's a juggling act for central banks and governments to allow for a flexible enough money supply without creating complete collapses of faith in currencies and assets. (Don't think they're doing a great job of that this particular decade, but putting that to one side...) An economy where a bubble was completely impossible would probably be one where investment and speculation were very difficult, and that wouldn't always be a good thing. It doesn't mean bubbles are good, but they may be an inevitable side effect of other aspects of a modern economy that are good. Quote Link to comment Share on other sites More sharing options...
doomwatch Posted May 23, 2006 Share Posted May 23, 2006 I think you are trying to say business brings innovation. Quote Link to comment Share on other sites More sharing options...
Magpie Posted May 23, 2006 Share Posted May 23, 2006 I think you are trying to say business brings innovation. Who me? If so, what I'm saying is that loose money and high liquidity encourage innovation and investment (good and bad) - so "dodgy money" is a double-edged sword. You might get the South Sea Bubble, but you also might get the railways, canals, and the draining of the fens etc. Central banks and govts have to try and encourage the latter, without allowing the former, but it's a tricky balancing act. Maybe "business brings innovation", but business tends to be less innovative when speculation is difficult or impossible. Quote Link to comment Share on other sites More sharing options...
rockdoctor Posted May 23, 2006 Share Posted May 23, 2006 Bubbles are great. They're pretty, and they entertain my kids for hours. Quote Link to comment Share on other sites More sharing options...
Guest Winners and Losers Posted May 23, 2006 Share Posted May 23, 2006 like the name...... Oh dear. It's like turning up at a party wearing the same outfit as somebody else. Quote Link to comment Share on other sites More sharing options...
spuggy Posted May 23, 2006 Share Posted May 23, 2006 Anyone think of an aspect of the Housing Market Bubble that has helped humanity? Better Designed houses? Better Decorated houses? High Quality TV dedicated to improving / selling houses? Maybe not. Quote Link to comment Share on other sites More sharing options...
StrapInThisIsGoingToHurt Posted May 23, 2006 Share Posted May 23, 2006 Has the HPI bubble helped humanity? Not at all. It has widened the social divide; disillusioned many millions of potential FTBs like me; and encouraged us to get out of the UK for a while. I like the UK: but I hate the almost fictional house prices. On the positive side, it has made plenty of ill-educated people think they are "rich;" hence the large number of plasma TVs in little lounges and Cayennes parked neatly in the lovely "off-street" parking those lovely homes provide. But bubbles always pop, eventually... Quote Link to comment Share on other sites More sharing options...
BuyingBear Posted May 23, 2006 Share Posted May 23, 2006 (edited) In the future the Housing Bubble may have helped create new and cheap homes for low earners (once the BTL's are forced to sell); admittedly rubbish luxury flats, but better than nothing. It will certainly be a boon for the demolition industry within the next decade! The housing bubble represents a wholesale misallocation of capital, assigning undue worth to a pile of unproductive bricks doesn't help anybody, it doesn't drive investment, R&D or new industries. Investing in fibre optic networks that will last for centuries is akin to the railways, an heroic failure with positive outcomes. Pricing people out of Amazon.com stock is a shame, but pricing people out of a basic necessity and raising the cost of living is wholly negative. So I can't agree, this is a tawdry bubble, repricing and rebasing the existing house stock is pure speculation, an elaborate game of pass-the-parcel, it hasn't created anything anew and it hasn't driven any form of lasting longterm investment for the future. We've lost more than we've gained, housing shouldn't be an issue, just like buying a bag of apples or toothpaste isn't an issue. People should be left to get on with more important work rather than messing about with the basics like neanderthals. Edited May 23, 2006 by BuyingBear Quote Link to comment Share on other sites More sharing options...
objective Posted May 23, 2006 Share Posted May 23, 2006 Hasn't it kept the economy going after the dot.com bubble? I just worry what the next bubble will be to keep the show on the road. Quote Link to comment Share on other sites More sharing options...
jp1 Posted May 23, 2006 Share Posted May 23, 2006 Hasn't it kept the economy going after the dot.com bubble? I just worry what the next bubble will be to keep the show on the road. That's precicey it. There is nothing else to keep the show on the road Quote Link to comment Share on other sites More sharing options...
BuyingBear Posted May 23, 2006 Share Posted May 23, 2006 (edited) Hasn't it kept the economy going after the dot.com bubble? I just worry what the next bubble will be to keep the show on the road. Yes, there has been growth but what are we left with? Any new investment or lasting new infrastructure or simply a pile of debt that needs to be repaid with interest? We've just had wanton consumption with lots of borrowed money pissed against the wall, we've taken tomorrow's income and spent it today, business investment is at its lowest point ever. Edited May 23, 2006 by BuyingBear Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.