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Straight Story: Bubbles can be good
Economics editor Chris Farrell
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Too suggest, and glibly at that, that there are silver linings around the dark economic clouds hovering over the American and world economies is unconscionable and cold.
Rising food and fuel prices affect most people, not just those whose food budget is "98% of their income" as you stated.
Sure, it may be a good time to buy stocks or real estate; but, how many of us working people--plumbers or doctors-- are able to know what
investment objects are undervalued or will profit when business starts picking-up? And Human logic does not necessarily conform to the logic of academic models, regardless of their historical or mathematical basis. Furthermore, as your glib tone seemd to imply, the rest of us are over-reacting to skyrocketing cost of living. Well, most of us are not Wall Street insiders or sitting on a cushion $$.
After I heard your view on a weekend replay of AMP, I flipped the radio dial. You may convey to Tess, whose vocal tone seemed to express doubt of your words and incredulity of your flippancy ,that I don't plan to listen until your dismissal.
Chris Farrell's Straight Story: Bubbles Can Be Good was, as he said in ending the story, a "good discussion." I have done some reading on economics, although probably much less than Chris, and I can't recall any material that suggested bubbles are good. The most often cited bubble example was the tulip bulb bubble. I don't know what good came from that bubble other than a fantastic example to demonstrate that bubbles are bad. Chris said that the housing bubble was a good thing because it improved the housing stock in the country. Not sure how he would support that statement. Has he seen the decline in the condition of the housing stock in cities around the country. Houses have been trashed, abandoned, stripped of copper and should probably be razed. Billions of dollars from home loans have been flushed down the toilet. According to the Federal Reserve, the hundreds of billions of dollars of loses came dangerously close to collapsing the economic markets. Hence, the need to bailout Bear Stearns.
Very disappointed with Chris's advice to lady in Idaho, with two homes. Before telling her she will have to pay 15% capital gains, he should have asked her have you lived at least 24 months in the house during the past five years. If the answer is YES, then their is zero capital gains tax.
