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Weekend reading recommended via Pragmatic Capitalist and Zero Hedge: Boeckh Investment Letter's...

Weekend reading recommended via Pragmatic Capitalist and Zero Hedge: Boeckh Investment Letter's "The Great Reflation Experiment" (.pdf), which contends that a long-term inflationary approach has the U.S. consigned to a roller-coaster ride of bubbly cycles: Saying the crisis was a "black swan" event "is grossly misleading, as it implies that the crash was so far beyond the realm of normal probabilities that it was unreasonable to expect anyone to have foreseen it."
Comments (2)
  • bricki
    , contributor
    Comments (1099) | Send Message
     
    While I agree with the premise that an inflationary bias leads to asset price bubbles, there was more going on during this recession than just that - we also had a great deal of money creation due to over-the-top leveraging by large financial institutions. This leads to a large multiplier effect, exacerbating the effects of excess money supply.

     

    With both of these effects in play it is hard to argue against the idea that this was not an exceptional event.

     

    I am also starting to wonder if asset price bubbles aren't also the normal result of affluence in an economic system because of the availability of capital that is seeking improved returns. After all, we have had asset bubbles going all the way back to the South Sea bubble. Such bubbles just become larger and more frequent the more money is sloshing around.
    1 Aug 2009, 12:13 PM Reply Like
  • Illusional Delusion
    , contributor
    Comments (346) | Send Message
     
    IMO, asset bubbles are natural. Whatever form of money, there will be a tendency to hoard assets since it replaces the value of production and easier to hoard than actual production. It is harder to predict the peak, but not the formation.

     

    On Aug 01 12:13 PM bricki wrote:

     

    > While I agree with the premise that an inflationary bias leads to
    1 Aug 2009, 02:06 PM Reply Like
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