On the last day of 2008, it’s nice to see this year end. It was the year the housing bubble burst. A few years ago we lived through the tech bubble, now we suffer with the housing bubble. How many bubbles does it take to make a bubble bath? Certainly our housing bubble gave the entire world a bath. We stuck everyone around the globe with our bad paper. But, is this the last bubble?
Most of what I read and believe would suggest we have a few more bubbles coming. There is the possible credit card bubble. Then there is a looming commercial mortgage bubble. Some say there is an unfunded pension bubble. I think we could face a green bubble. The more bubbles, the bigger the bath.
Greed and greed alone is the main cause of all the bubbles. When the tech bubble burst, it was a free enterprise bath. If you got too greedy and over invested in tech stocks you took the bath. No one came to your rescue. Billions in investor assets were lost.
When the housing bubble burst, everyone needed help. The poor people who were convinced to buy a house they couldn’t pay for needed help. The poor lending institutions that collateralized these bad mortgages into commercial paper needed help. The insurers who insured the bad mortgages needed help. Freddie and Fannie who caused the problem needed help. Billions have been passed out to ease the pain, but the pain continues. How much more help is needed?
If there is a credit card bubble coming in 2009, what is different? People were given huge incentives to buy on their credit card. People who couldn’t pay were given credit cards. The same lending institutions who are being saved by TARP will need CARP to fix this problem. The same poor people who can’t pay are being charged 20% on balances and will never be able to pay. Do we bail them out too?
If there is a underfunded pension bubble coming, who helps those victims. Their employers have dipped into the pension fund to stay afloat to keep from shutting down in these hard times. Just a legal ponzi scheme. They use the money they own people 10 years from now for current operations. If that money is gone and will never be made available and millions of Americans who have worked years and years expect to get a pension they will never get, who bails them out?
The car companies are using government money to sell cars at 0% interest to people with the same credit rating that would be considered sub prime. A new bubble being built?
What I call the Green Bubble hasn’t really started yet. We could still avoid this one. Will we? Here’s how I see it unfolding. Billions will be made available for renewable energy. It will be spent on wind, solar, Sierra Club designed cars, algae, plankton, and God knows what else. People will invest in these as well as the government investing our tax dollars. As the effort unfolds, every day it will be more and more evident that the payoffs are not supporting the investments. Investors will start bailing. Thousands of people employed in pursuit of this effort will face layoffs. The bubble will burst.
Every bubble we face is still based on greed mixed with faulty judgment and government involvement.
If you liked the tech bubble and the housing bubble, stay tuned. You still stand to take more baths with more bubbles before the bubble era is over.
