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RE: The Everything Bubble is about to burst

in #money7 years ago

If one asset class was in a bubble, I'd totally agree. However, its not one asset class, its everything. And thats due to the fact that we have an enormous global debt problem and extremely low interest rates. There is no incentive in government to fix it so the only way this gets resolved is through creation of money which pushes prices higher, which promotes people to take money out of savings and invest in these assets. People will not sell assets until they get rewarded for saving.

Even if we started a deflationary cycle, it wouldn't take long for the Fed to come in and prop it up. I honestly believe its more likely that we get faster inflation before we get any kind of deflationary sell off. And thats the thing about bubbles. They can get huge before they pop. Would need a paradigm shift or black swan before this changes.

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Just because prices seem to be going up does not mean we are in a bubble. I think the real issue is not over-valuations, but rather the rush to get out of cash into literally anything. The lone voices calling for the end of currencies have turned into a crescendo of sirens. If you were in Zimbabwe when the currency collapsed, you wouldn't have said that prices are in a bubble. If you are in Venezuela today, you would do anything you can to turn your Bolivars into something tangible like gold, bitcoin, or American dollars. You wouldn't call it a bubble. You'd see it as falling value of the currency.

One of the first signs that currency is about to fail is rising prices. people see opportunities for profit everywhere.

In pre-war Germany, its citizens didn't wake up one night saying "all my money is worthless. I'd better put it in a wheelbarrow and light the fire with it." The end of the currency started with opportunities for profit. You could buy land, buildings, food, animals shares of businesses, commodities, gold or, foreign currency and the prices would rise. There were profits to be made in everything. It wasn't a bubble. It was a currency decline. The great German empire had spent too much fighting wars and paying reparations, and could no longer service its debt. so it resorted to printing the difference.