Bubble Watch: The Bubble Backlash Bubble
The Great Recession of five years ago scared many Americans. Now that the Wall Street economy is booming again, many have rushed to warn against irrational exuberance. The common media practice of always staying one step ahead of conventional wisdom is now producing an Anti-Bubble Bubble.
Historically, what happens in the economy is some aspect of it (like tech stocks, or the housing market) inflates to ridiculous levels, and all the media acts like cheerleaders for this new economic paradigm, and then it all comes crashing down, devastating millions of people, and the media looks like idiots for believing the hype. But the 2008 collapse was so catastrophic and so (in retrospect) easy to see coming that every idiot in the media is now prone to shout "Bubble!" every time they spot a high-priced sandwich, just to cover their ass in case it all collapses tomorrow again.
That state of affairs is preferable, at least, to the one in which the media is all shouting "Borrow and buy!" just before the crash. But it cannot last. Nobody in the smart part of the media wants to be seen as just saying what everyone else agrees on. It is a law of the news cycle that each position, once accepted as conventional wisdom, will spawn counter-positions (and counter-counter-positions, if you're really smart!). Christ, when even the Federal Reserve is chattering about bubbles, there's no intellectual sizzle to be found just by following along.
Anyhow, all that talk of these all-time stock market highs causing bubbles? Pish posh! The only interesting move now is to observe knowingly that bubble chatter is everywhere—"It's a good sign that bubble-caution lines the intestines of investors and the media;" to shrug and say that the dynamics of financial bubbles are unknowable to mankind—"Bubbles: No One Has Any Idea What's Going On;" or to dismiss all the worrying entirely—"Talk of a market bubble is the real bubble." A fourth option is to chew over the meaning of the word "bubble" until it has reached the consistency of cream of wheat. By the time we all agree on the definition of the term, everybody will have forgotten what they were worried about to begin with.
In order to stay ahead of the Bubble Backlash Bubble, we will continue just calling things bubbles, as always.
Other bubble candidates this week: equity markets, home prices, and frozen soap.