America Lost in a Bubble
All bubbles burst.
This is a law of nature. No
matter from what material the bubble arises.
No matter what forces propel its expansion. All bubbles burst.
Actually the science of bursting bubbles has recently popped
into the forefront of scientific discovery.
Conventional wisdom has taught since the beginning of time that when a
bubble bursts it simply vanishes.
However, recent observations using high speed cameras has revealed
that when a bubble bursts it leaves a circle of miniature daughter bubbles that
pop so fast the eye cannot catch it.
There is even the thought that each daughter bubble leaves a ring and
each daughter bubble leaves a ring ad infinitum. All happening so fast it cannot be
seen. And yet, each succeeding bubble
bursts.
The physics of bubbles tells us that the pressure on the
inside works against the tension on the surface and a ratio between the two
determines when the bubble will burst.
No matter how it bursts, no matter why or when it bursts one thing is
certain: all bubbles burst.
In economics a
bubble is the term commonly used for a cycle characterized by rapid expansion
followed by rapid often dramatic contraction.
What causes economic bubbles is often a matter of dispute among
economists. Some believe they are a natural part
of the economic cycle: everything goes up, and everything eventually comes back
down.
Others believe they are caused by
inflation. In this scenario
everything has a natural price which is the intersection of cost and
demand. The Bubble is the artificial
rise of price over the natural price.
Eventually the economy must correct itself and the inflated product will
return to its natural price.
No matter which theory you subscribe to, one thing is
certain: all bubbles burst.
Remember the Clinton
years? Today the official History as
dispensed constantly by the Corporations Once Known as the Mainstream Media is
that the wise and benevolent rule of the man from Hope was a time of plenty. There was solid growth and balanced
budgets. As the Progressive narrative
goes, President Clinton alone was responsible for the growth of the nineties
which Bush the Younger proceeded to destroy leaving a mess for President Obama
who has fought valiantly to restart the economy and save the day. At least that’s the story as dispensed by the
headlines and the talking heads.
The reality is approximately 180 degrees opposite
of the spin.
President Clinton won a three way election with less than
50% of the vote (twice) and called it a mandate both times. The policies he opposed for his entire career
had recently won the Cold War, and President Clinton reaped the rewards. He gutted the military and called it a Peace
Dividend which he proceeded to spend on social engineering projects pumping up
the economy with government spending. Then
the Dot-com Boom turned into the Dot-com
Bubble and the economy was roaring.
Another plus for Clinton was the defeat
of Hillarycare
which would have torpedoed the economy just as Obamacare is now. He also profited by the election of a
Republican House in 1994 which kept the promises in the Contract With America
and led the way in cutting spending and building a budget that at least
appeared to be balanced.
Everything was coming up roses. The economy was growing and
so was the Dot-com Bubble, which everyone just knew would go on forever even
though anyone older than the milk in the fridge should have known that all
bubbles burst.
In 2000 George II won a contested election, and before he
had time to change the drapes in the Oval Office the Dot-com Bubble burst. This led to a short sharp recession; this was
the one that Bush didn’t blame on Clinton . He instead passed the now infamous Bush
tax cuts and mailed out what he called rebates in the form of free money to
spur the economy. All the while behind
the scenes the housing bubble was beginning to inflate to epic
proportions. Federal spending grew, the
government grew, and the bubble grew.
During the go-go years people with no job, no money, and
sometimes no ID were able to buy McMansions for no money down and walk out with
cash in their hands. How could this ever
go wrong? I remember hearing of people
bidding on houses, offering 10% over the asking price and losing out to someone
who offered more. Prices went up and up
and up and somehow even sane people apparently thought it would never end.
Things looked good.
Things looked very good. Following
the recession which began seven weeks after President Bush took office, America had six years of uninterrupted economic
growth. There were fifty two straight
months of job creation producing more than eight million new jobs, the
unemployment averaged 5.3 %, after-tax income per capita increased by11%, from
2000 to 2007, and GDP grew by more than 17 % adding almost $2.1 trillion. Exotic ways to paper over the fact that
people with no money were buying houses fueling the boom kept everyone smiling
and the bubble expanding.
The only problem was that eventually all bubbles burst. And when it did John McCain suspended
his presidential race to fly back to Washington
and add his hearty, “Me Too” to the bailout and seal his fate.
President Obama took office as the economy crashed into the
deepest recession since World War Two.
He immediately began blaming
President Bush and hasn’t stopped yet.
He passed the largest stimulus bill in American History, began a record
expansion of the Federal government, and the largest spending
binge since the beginning of time.
All in the name of cleaning up the mess from the bursting of the housing
bubble.
And what are all these trillions of dollars in reckless
spending doing? Are they inflating
another bubble? Change the words and you
change the perception: spending becomes investment and responsibility becomes
austerity. Those who are manning the
pumps aren’t blowing up a financial bubble they are showing compassion for
their fellow man and investing for the future.
Anyone who warns of a coming crash or tries to slow the rate of spending
is pushing grandma off the cliff for the benefit of millionaires and
billionaires.
No matter how this mad dash to nowhere is spun one thing is
certain: all bubbles burst
On the brighter side President Obama has perfected the cure
for illegal immigration. The economy has
taken such a massive hit that the illegal immigrants are leaving looking for
greener pastures. And he has also
brought the solution to a 10%+ unemployment rate. So many people have become discouraged that
they have dropped out of the labor market, and according to our current
administration this is good news. Perhaps
we should take a cue from Mr. Obama’s favorite pastime and just consider his
first term a
mulligan.
Maybe the slogan for President Obama’s second term shouldn’t
be “Forward.” Perhaps it should be “I deserve a re-do.”
Just remember: all bubbles burst.
Dr. Owens teaches History, Political Science, and Religion
for Southside Virginia Community College. He is the Historian of the Future and the
author of the History of the Future @ http://drrobertowens.com
© 2012 Robert R. Owens drrobertowens@hotmail.com Follow Dr.
Robert Owens on Facebook or Twitter @ Drrobertowens
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