The Economic Recovery is Actually a “Bubblecovery”
Most mainstream economists and economic commentators, the same group that didn’t foresee the housing & Global Financial Crisis, are now saying that the economy is on the “road to recovery” as the housing market and consumers slowly but surely heal.
What these mainstream economists do not realize is that our bubble problems didn’t end with the housing bubble. The very same socio-psychological and monetary factors that caused the last decade’s housing bubble and other excesses have created numerous other bubbles that have not popped yet. There are many bubbles that are still expanding and creation an illusion of economic strength, including rising stock prices, while threatening to devastate the global economy upon their inevitable popping.
The Post-2009 Economic Bubbles that I have identified have greatly expanded since the depths of the Great Recession in early 2009 and are largely responsible for creating the illusion of an economic recovery. This “recovery” is mostly artificial as it is based largely on these bubbles (I call it a “bubblecovery“) and very little on true economic substance. When the Post-2009 Economic Bubbles pop, the false recovery will violently end and the secular bear market and economic decline that began in the year 2000 will continue.
Introducing the Post-2009 Economic Bubbles:
The Post-2009 Global Housing Bubble or “Housing Bubble 2.0”
(this bubble encompasses all of the country-specific bubbles listed below)
After the cataclysmic mid-2000s housing bubbles in the U.S. and European PIIGS nations, one would think that the world would never allow another housing bubble to rear its ugly head again. Unfortunately, this thinking is completely wrong. Since 2008, the world has openly embraced new housing bubbles with astounding vigor, in complete defiance of all lessons taught by the Global Financial Crisis. A series of new housing bubbles have inflated in practically every country outside of deflation-prone Japan, the U.S. and PIIGS nations. These new housing bubbles are located in China, Canada, Australia, emerging market countries and northern & western Europe.
Read more about the Post-2009 Global Housing Bubble
The Post-2009 Northern & Western European Housing Bubble
(this bubble is a subset of the Post-2009 Global Housing Bubble)
Could Sweden or Finland be the scene of the next European financial crisis? It is actually far likelier than most people realize. While the world has been laser-focused on the woes of the heavily-indebted PIIGS nations for the last couple of years, property markets in Northern and Western European countries have been bubbling up to dizzying new heights in a repeat performance of the very property bubbles that caused the global financial crisis in the first place.
Read more about the Post-2009 Northern & Western European Housing Bubble
Amid the excitement over the rise of China, investors and economic commentators have been eagerly scouring the world for “The Next China” – or at least the next country to supply the raw materials that China needs for its boom (and construction of empty cities!). Global investors, seeking to diversify away from the heavily-indebted post-crash Western world, have inadvertently created a massive “hot-money” bubble in emerging market nations, causing overheated economies and property bubbles everywhere from Brazil to Turkey to the Philippines. Soaring asset prices and easy money is creating “luxury fever” as emerging market nations copy the spendthrift ways that led to the West’s downfall just a few years earlier. In its essence, the emerging markets bubble is a derivative of the commodities and China bubbles and is highly vulnerable to their inevitable popping.
Read more about the Emerging Markets Bubble
China’s Bubble Economy
China’s economic bubble starting out as a boom based on successful economic reforms and modernization that helped to lift hundreds of millions of people out of poverty, while eventually devolving into an orgy of wild real estate speculation, reckless construction of empty cities to create economic growth and materialism mania. Even if China’s long-term growth thesis remains intact, the same was also true of the U.S. in 1929; China could conceivably experience a Great Depression of its very own when its massive bubble pops.
Read more about China’s Bubble Economy & Housing Bubble
Canada is caught up in a full-blown bubble that is very similar to Australia’s bubble. Canada’s bubble is based on a commodities boom (which is part of the commodities bubble), a massive housing bubble that is 40% larger than the U.S. housing bubble was at its peak, a household debt bubble and global “hot-money” investment inflows. Canada’s precarious bubble is no trivial matter for the already suffering U.S. economy as the two nations have one of the most extensive economic relationships in the world, with Canada being the U.S.’s largest export market. Read more about Canada’s Bubble Economy & Housing Bubble
In our age of incessant financial bubbles, it was only a matter of time before commodities experienced a bubble of their very own. Initially rising due the rapid development of China and other emerging markets, the price of nearly every commodity, from wheat to uranium, exploded during the past decade as hundreds of billions of dollars of capital entered commodities as the new “hot” investment destination. Terrorism, war in the Middle East, near-zero interest rates, quantitative easing and growing distrust of conventional investments have only served to bolster commodities’ newfound role as an investment. Now in its eleventh year, the fate of the commodities boom (and now bubble) is inextricably tied to China’s teetering economic bubble, Western economies on the verge of another financial crisis and the vagaries of speculative capital flows.
Read more about the Commodities Bubble
The U.S. College & Higher Education Bubble
For many of today’s college students and recent graduates, obtaining a degree means taking on mortgage-like levels of debt without having the house (or much of a job!) to show for it. Like housing in 2005, the institution of college education is firmly in the throes of a bona-fide bubble that will end just as disastrously. College tuition costs are soaring and forcing our nation’s young to bear obscenely high levels of student loan debt, while a ballooning $1 trillion student loan bubble shares a strikingly scary resemblance to the toxic subprime mortgages of six years earlier (and are just as likely to be repaid). As more and more college presidents shamelessly bank $1 million per year and colleges build opulent mega-million dollar stadiums, their graduates struggle to find minimum wage jobs in the worst job market since the Great Depression. You know there’s a crisis when even young law school grads are forced to become topless dancers to support themselves and their crushing student loan bills! Read more about the U.S. College Bubble
Abundant hype, wildly overvalued IPOs, overnight millionaires, questionable business models, scores of startups offering gimmicky and frivolous services, the social media bubble has it all – it’s a dream come true for Generation Y techies and investors who missed out on the Dot-com bubble or for those folks who simply feel nostalgic for the heady days of the late 90s.
Read more about the Social Media Bubble (aka The Facebook Bubble)
Click on the buttons below to discuss or ask me any question about these bubbles on Twitter or Facebook and I will personally respond:
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