Comments on: Andy Xie: Why One Bubble Burst Deserves Another

By: WaltFrench

WaltFrench — Tue, 06 Oct 2009 22:47:36 +0000

Alas, much as I think this is an accurate description (“positive”), I don’t see how it’s prescriptive (“normative.”) The part that comes closest,

When inflation becomes a political problem and policymakers are forced to respond, money supplies will be cut. After that, no more bubbles.

describes a Hellish collapse, although no policymaker I can imagine would eliminate our mechanisms of leverage. We go out too far on that limb, from time to time, but nobody wants a barter economy.

By: wally

wally — Tue, 06 Oct 2009 12:56:04 +0000

“In the best scenario, smart traders buy assets ahead of others because they see a stronger economy ahead.”

A minor quibble: there are no ‘smart’ traders, only traders who are made ‘smart’ by subsequent events.

By: Mannwich

Mannwich — Tue, 06 Oct 2009 04:30:21 +0000

Fantastic post, Mr. Xie. Well done.

By: billbengen

billbengen — Tue, 06 Oct 2009 03:10:36 +0000

Insightful, incisive, and prescient. One of the best article of the year.

By: Simon

Simon — Mon, 05 Oct 2009 21:54:22 +0000

Actionable macro economic analysis in a nut shell. Brilliant!

By: emmanuel117

emmanuel117 — Mon, 05 Oct 2009 19:11:06 +0000

“A technology bubble can be extended by cutting costs and boosting profits. A property bubble stimulates demand in many parts of demand and can boost corporate earnings, benefiting financial institutions, retailers, construction companies and material suppliers. This large multiplier effect is why a property bubble usually lasts many years.

Only a multiplier effect from the current bubble is stopping financial institutions from going under. However, weighed down by trillions of dollars in non-performing assets, they cannot lend with abandon again, which makes it impossible to revive property bubbles. Besides, American households won’t join the “borrow-and-spend” game again. Essentially, the main short-term impact of the current bubble is preventing the financial system from collapsing. It won’t lead to substantial demand creation.”

Great stuff!