Friday, April 2, 2010

Bubble, Bubble, who has the Bubble now?

Bubbles - Image Credit:

Bubble, Bubble, who has the Bubble ... now?

Our cultural lexicon has been inundated with the concept and effects of the "Bubble" these last few years.

A Bubble is an artificially modified sustaining of an activity which has been created to attract attention and interest in people so that they either believe that something is better or good and to have people invest their time and/or money upon said activity to sustain the effect.

Generally, and this is why these activities are called Bubbles ... the activity BURSTS ... and people loose their well intended time and/or money.

Take the new jobs number released this morning for example. The number of people employed increased and showed the largest jump in the growth in jobs in three years - good news, right? Well, there is a trick behind the job growth, which represents 1/3 of the jobs created, and it is called temporary, single project government hiring - for follow-ups on the United States census. At $21.00 an hour, most people without a job would gladly sign up and take these jobs to knock on doors and gather information ... but these jobs come from Government spending (tax and borrowing against the deficit from China) and will only last until the census information taking is completed (months at best), and there is the rub - it is the next big Bubble to BURST!

We have seen Investment Bond bubbles, Dot.Com internet company creation and company investment growth bubbles, and most recently, Government seeded loose housing purchasing rules and Mortgage Packaging bubble run roughshod through our economy but the one Bubble no one wants to recognize is the looming Big, Bigger, Biggest Government Spending Bubble!

Imagine the world surrounded with bubbles. Image Credit:

This excerpted and edited from Businessweek -

China’s Central Bank Sees New Asset Bubbles Emerging

Bloomberg - April 02, 2010, 7:41 AM EDT

China’s central bank said asset bubbles are emerging in parts of the world and in certain industries that may burst unless supported by real economic recovery.

Rapid asset price increases in major markets since 2009 have been pushed by “ultra-loose” monetary policies by governments around the world and “don’t mean real economies have recovered or will recover strongly,” the People’s Bank of China [PBOC] said in a report posted on its Web site today. Such gains “unless they receive sufficient support from macroeconomic fundamentals, may lead to a new round of asset bubbles that may burst,” the Beijing-based bank said.
Governments worldwide have spent more than $2 trillion in fiscal stimulus to spur growth and may face difficulty coordinating exit strategies because of the “unbalanced global recovery,” the central bank said. The withdrawal of support, together with the threat of inflation and the risks surrounding the sovereign debt of some economies complicate the process, the PBOC said.

Asset bubbles are the “real worry” as China emerges from the global financial crisis into a “boom time,” former central bank adviser Fan Gang said Feb. 1. Economists at the government- backed Chinese Academy of Social Sciences warned Jan. 11 that the nation’s gross domestic product could expand as much as 16 percent in 2010 unless policy makers withdraw stimulus.
The PBOC’s comments today echo those of other international central bank officials. Donald Tsang, Hong Kong’s chief executive, said Nov. 13 that he was “scared” that money flowing into Asia because of low interest rates in the U.S. could lead to another crisis in the region. World Bank President Robert Zoellick told Australian Financial Review on Jan. 13 that a liquidity-driven world recovery faces the risk of asset price inflation.
Reference Here>>

The Obama Administration has not learned the lessons of the past shown in the economic policies of the Carter Administration. During the one-term Carter Presidency, we saw inflation and recession happen at the same time and send our economy into a tailspin.

Now that Health Care Reform has just been signed into law, this effect will pale in comparison with the economic policies implemented here during Carter's Second Term! Just ask our biggest debt investor ... China. To have them tell it, we are drowning in Bubbles.

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