In this week's Off the Cuff podcast, Chris and Mish discuss:
- Growing Demand for Bad Ideas
- Politicians are showing an astounding ignorance of how money works
- We're In Another Bubble
- Bigger and more dangerous than before
- A Shortage of Sanity
- Malinvestments galore
Investment manias have happened throughout history. The less effective parts of humanity conspire to create "the madness of crowds," and suddenly everyone is rushing to pay a year's salary for a single tulip bulb.
Such manias accompany asset bubbles, and they are extremely destructive. They suck in the masses during the euphoria stage, and then, as the bubble pops, the average investor loses all, while the vast majority of the wealth ends up in the hands of a relative few.
Historically, asset bubbles were a once-in-a-generation type of event due to the severity of their repercussions. People remembered the ensuing tribulations and vowed: Never again. And so conservative behavior reigned – until a new generation, one with no memory of the risks, emerged.
Yet today, we have now seen three asset bubbles in less than 15 years (tech stocks, housing, and now, nearly all paper assets). How could our populace's memory be so short? How have we forgotten the gut-wrenching effects of the 2008 credit crisis than turned everyone's 401k's into 201k's? That turned huge housing profits into underwater mortgages nearly overnight?
by jtwalsh