Alternative Title: something lifted from the witches in Macbeth, I should guess.
People at Barrons and WSJ will no doubt cite Minsky and JK Galbraith (the latter whom I quite like to read), but we can cite Marx and the Marxist tradition on bubbles. But wait, at the finance journalism sites, no one is discussing the oil pricing bubble--yet. And one could still say there is a dot com bubble once you look at Google and others, including the recent wave of buyouts amongst them related to internet advertising (where the prices exceeded Cerberus' buying Chrysler easily). Nevertheless, 'bubble' analysis at marxist.com goes back to 1999. Here is a selection (in excerpt form with links) that starts from that year and runs to 2005, with discussion of the property bubble. Also attached is an excerpt of something (at TomPaine) about the oil pricing bubble, originally from the Global Economic Forum, linking to an article up at Morgan Stanley (but I can't find the original, yet). CJ ------------------------------------------------------------------ http://www.marxist.com/bubbles-burst-economy011099-4.htm Like all bubbles, this will burst By Socialist Appeal Editorial Board Friday, 01 October 1999 "As the events of Black Wednesday show, global financial markets can now turn a country upside down within 24 hours." Larry Elliott, Guardian economics editor, 17/9/99. The British economic recovery - heralded by Gordon Brown - is hanging by a thread. It rests on the the fragile foundations of a consumer boom in Britain, and far more importantly, in the United States. Moreover the US economic bubble is keeping the world afloat at the present time. This is a fact recognised by all the economic pundits. "America, in turn, has become the global economy's buyer of last resort, soaking up the goods churned out by factories in Japan, Germany, Indonesia, South Korea and Brazil", stated Larry Elliott. (Guardian, 1/7/99) But how long can this last? Elliott correctly concludes: "Should demand in the US dry up, the retrenchment could trigger a second leg to the world economic crisis that started with the devaluation of the Thai baht two years ago tomorrow." The "New Paradigm" The gurus of the New Paradigm say this will not happen. America has sustained growth with low inflation, its industries are lean and fit, and the rest of the world is happy to finance the deficit. The situation can last indefinitely. But this is false. http://www.marxist.com/economy-bulls-bears-bust160400-5.htm Bulls, bears and bust By Michael Roberts Sunday, 16 April 2000 In the last few weeks there has been a huge crash in the stock prices of the new information technology companies. Until then, the great new economy of computers, mobile phones, digital TV and, above all, the internet has been greeted by capitalist investors around the world as an unstoppable avenue to untold wealth. Every day we have been told in the newspapers of yet another 20-something internet entrepreneur, who, with a small bunch of others, has come with an idea to sell something on the internet, and then becomes a multi-millionaire overnight, thanks to a launch on the stock market. Investors, like lemmings, have been rushing to throw their money at any dot.com company they can find. The stock prices of these companies have reached the stratosphere. Take the handheld computer maker, Palm. On March 2, it went 'public' by issuing 23m shares at $38 each. Right away, the price jumped to $160, making the company worth $90bn, or equal to the annual output of Indonesia with its 200m people! But Palm has sales of less than $1bn a year and makes no profit - pretty good for a product that's no more than a pocket calculator with an inbuilt modem for the internet. Palm was worth more than General Motors or Boeing who employ hundreds of thousands and make billions of profit. But now the bubble is bursting. In just a few weeks, the stock price of these high-tech stocks, as measured by the NASDAQ stock market in the US, has fallen 40%. And there's much more pain to come. The whizz-kid internet entrepreneurs may have got their paper millions from gullible and greedy investors but that paper wealth is beginning to burn to ash. Within the next five years, 90% of these upstart companies will have disappeared. It's going to be short-lived for lastminute.com. It was the same in previous technological revolutions under capitalism. There is an initial boom or rush as investors pour in money to take advantage of supposedly undreamt of riches generated by huge increases in the productivity (and profits) of the new industries. That's what happened in the steam and railway revolution of the 19th century and in the electrical/motor vehicle revolution of the 1920s. But under capitalism, investment is made in a giant casino where lady luck decides where investment goes. It is anarchic, not planned. Investment, inevitably, exceeds the profit created. http://www.marxist.com/us-capitalism-deeper-hole100702-4.htm US capitalism: Digging a deeper hole By Michael Roberts Monday, 10 June 2002 There's a story about the Great Depression of the 1930s. A distressed American banker decided to end it all by jumping out a window on the 12th story of the old Maryland National Bank building in Baltimore. As he was going by the 5th floor, he was heard to remark: "Well, I'm all right so far." That was the consensus coming from the economic pundits in the US and UK until just a few weeks ago. But now the mood is changing. This last weekend the papers are full of worry and concern with headlines like "Capitalism is sick" or "It's all gone bear-shaped". The capitalist pundits are worried that the US and world capitalist economy is not recovering as they expected. And stock markets around the world are plummeting. The experts are beginning to agree with what we said last October in this column: "Indeed, there are four bubbles. The first was hi-tech investment in dot.com and internet companies. That has well and truly burst. The second was the collapse of the stock market that financed all those internet start-up companies. Share prices around the world are now down 30-60% from their peaks in March 2000. But there's further to go. The third bubble is still expanding: namely, the property market. American and British households, in particular, having had their fingers badly burnt by investing in the stock market, continue to push cash and borrow more to buy bricks and mortar - the safe investment. That bubble has still to burst. And further down the road is the bubble of paper currencies, in particular, the dollar. http://www.marxist.com/property-time-bomb150605-5.htm The Property Time Bomb By Michael Roberts Wednesday, 15 June 2005 The world capitalist economy is being held up like Atlas by just two forces: US household spending and Chinese manufacturing production. If either or both of these should die, then world capitalism will slip into slump. US household spending growth is probably the most important of these two factors. What is driving this 4-5% annual growth in spending? It's not rising wage rates. Indeed, for the average American household, income from work is falling. No, what's been keeping Americans spending has been partly tax cuts, as Bush cuts back on social spending programmes to make handouts, mainly to the rich through cuts in big business taxes, but also to middle-class Americans in personal tax rebates. http://www.tompaine.com/articles/the_oil_bubble.php The Oil Bubble Andy Xie March 04, 2005 >From Global Economic Forum: Asia/Pacific: Oil Is a Bubble Andy Xie (Hong Kong) The impact of high oil prices on China's economy and on profit margins in general is a key risk in the current global boom. If current oil prices persist, the windfall for oil exporters may exceed the total earnings of S&P 500 companies, and China will have to pay 2% of GDP more in 2005 than last year for oil imports. China is a low-income economy and cannot sustain its rapid growth at current oil prices, in my view. Although current oil prices are still half as high as their peak during the oil shock in the late 1970s, China's per capita income is less than one-tenth of that among the OECD economies at that time. The global property bubble has covered up the impact of high oil prices so far. Anglo-Saxon consumers have leveraged their rising property values to overcome sluggish income growth and high oil prices, thus sustaining consumption growth. Chinese investors expect massive profits from property inventory in a rising market and are willing to absorb the higher materials costs as a result. Oil is a bubble because the strong demand reflects the global liquidity bubble. At the same time, financial investors have poured into this commodity. When the demand-supply balance is tight in a strong global economy, demand from financial investors can push up prices rapidly. Hence, even though financial investors lose some money for carrying a commodity without yield, the price increase in the short term can still make the trade very profitable. Without the demand from financial investors, the current oil price could be US$15/barrel lower, in my view. The oil and property bubbles are aspects of the global liquidity bubble that has arisen from the combination of a low US Federal funds rate and the willingness of Asian central banks to accumulate foreign exchange reserves. The property bubble is the primary manifestation of this liquidity. The oil bubble is a secondary aspect. Oil, however, could destabilize the equilibrium through its contractionary redistributing effects. _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
