BY RUSSELL TURNER
BLOWING BUBBLES
I haven’t seen a child yet who didn’t like to get a bottle of bubbles and take the little round wand that is inside of the bottle and start blowing into it and making countless bubbles. For a while it seems that the bubbles will last forever, but it is a fact that they will eventually fall to the ground and burst. When you take an objective look at the world’s economies they bear a striking resemblance to a child blowing bubbles.
Over the past couple of decades we have seen several economic bubbles form and each time countless people have lost their shirts. The tech bubble in 2000 and the real estate bubble in 2008 are two of the most recent examples. Sadly we humans never seem to understand why these upheavals happen. Too many of us become blinded by the promise of getting rich quick. We have a habit of believing those who tell us that everything is just fine and the markets will keep going up. I remember the time just before the 2008 collapse; financial institutions were loaning money to anyone who had a pulse even if they didn’t have the ability to pay the loan back. There were countless people buying and selling the mortgages, each one of them were adding a percentage while deluding themselves that it could go on forever. People were buying homes and were betting that the price would continue to go up, and they also believed that there was no way they could get hurt. Like all bubbles created by man the housing bubble did pop. People that worked for years to pay off their homes suddenly found out that the amount they still owed was more than the house was worth. All of their labor and investment was gone and they had nothing to show for it. The federal government spent trillions of taxpayer dollars to avoid a total economic collapse. Today I am seeing other bubbles that are forming that will cause even more damage, and this time our government doesn’t have the ability to avert an economic meltdown.
All bubbles happen because people are manipulated to think there is a demand for something when in reality the demand doesn’t exist. Over the past few years the auto industry has enjoyed a booming market of people buying new cars. This was mainly due to the lowering of the interest rates on borrowed money. The auto makers continued to build more and more autos with the belief that the public would continue the buying spree, but all of a sudden even with low interest the market has become saturated. Now many auto factories in Michigan are going dark because nobody wants the cars they make. There is also a glut of commercial properties that are becoming vacant because no companies need the space. Many companies are reducing their overhead with firings and layoffs of their employees.
While our government likes to use misleading data to claim that our unemployment rate continues to go down, they want to ignore the fact that our economy is only growing at 2%. Even with near zero percent interest rates some people are seeing the danger of continually borrowing more money. The next bursting bubble will be far worse that what we experienced in 2008 because our leaders have spent all of our reserves. Just like a child will eventually empty their bottle of bubbles, we are about to do the same.
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