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Bubbles are popping - a recession is coming!
Howard Richman, 8/26/2015

An economic bubble occurs when people have been bidding up something because they think that the price will keep going up. Once the price starts heading down, it goes down fast. There have been several famous bubbles in history including:

1. The Tulip Bubble

2. The South See Company Bubble

3. The U.S. House Price Bubble

David Stockman, former budget director under President Reagan, writes (Bubbles Don't Correct, They Burst):

We had the stock bubble in 1987, the tech bubble of early 2000, the real estate bubble in early 2006, another stock bubble into 2007, oil in mid-2008, gold in mid-2011 – and now, a final stock bubble into 2015.

They’ve all burst, or are still bursting!

When a stock market bubble collapses, stock owners suddenly find themselves to be less wealthy. So they stop spending as much money on consumption. At the same time, businesses expect consumption to fall, so they stop spending as much money on new tools and structures.

As a result, when bubbles pop, the economy usually goes into a recession. That's what I see coming next for the U.S. and world economies.

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Comment by Ron V, 8/29/2015:

Good article. I believe Mr. Stockman is correct.

The fed is really hesitating to raise interest rates, while our news media and the government, is playing Mr. Rogers theme song; It's a "Wonderfull Day in the Neighberhood". It indeed makes one wonder which set of numbers they are useing, those that are rea,l or the ones that are broadcast to the  public, such as the unemployment rate of 5.3%, the adjusted and readjusted GDP etc..  




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    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]