I recently read a section of Physics of the Future by Michio Kaku. It provides a scientific explanation for economic crashes. Bubbles and crashes might not be very unexpected after all. Science is not uniform either. It comes in waves that go like this. A seminal breakthrough occurs which leads to a cascade of secondary innovations. This, in turn, leads to vast amounts of wealth which is reflected in the economy. As a result, a bubble forms leading to a crash. The seminal invention's heyday ironically happens after the crash.
The earliest example in the book is the Crash of 1850. The first scientific wave started when James Watt invented the modern steam engine. This triggered the Industrial Revolution. This eventually led to the creation of the locomotive. A lot of excess wealth was created as a result. It had to go somewhere. It went into locomotive stocks in the London Stock Exchange. A bubble formed as a result. Because the locomotive was still in its infancy, the bubble burst which led to a stock market crash in 1850, followed by a series of minicrashes. The railroad industry ended up maturing in the 1880s and 1890s, when the railroad was in its heyday.
The next crash mentioned is the one the triggered the Great Depression in 1929. A second scientific wave began in 1879 when Thomas Edison in the lightbulb. Another seminal invention was the car. It wasn't until 1913 that Henry Ford invented the assembly line and brought forth the Model T. The electric and automotive revolutions of Edison and Ford proliferated throughout the world, creating excess wealth. Like before, this wealth had to go somewhere. It went into utility and automotive stocks on the US Stock Exchange. An unsustainable bubble formed which burst in 1929. This led to the Great Depression. After the economy recovered, the paving and electrification of America and Europe took place in the 1950s and 1960s.
The last crash mentioned in the book is the Crash of 2008. The current scientific wave began as a result of the Space Race. It is the high tech revolution that gave us the computer and the Internet. The wealth created as a result of the digital revolution went into real estate creating the housing bubble which burst in 2008. The wiring and networking of the world has not happened yet. The heyday of the information revolution has yet to come.
In addition, Michio Kaku predicts the possibility of a fourth scientific wave. He suspects it will involve artificial intelligence, nanotechnology, telecommunications, and biotechnology. This will create excess wealth which leads to a bubble that is likely to burst in 2087 before the heyday of the revolution comes.
This should be interesting to talk about. What do you think?
The earliest example in the book is the Crash of 1850. The first scientific wave started when James Watt invented the modern steam engine. This triggered the Industrial Revolution. This eventually led to the creation of the locomotive. A lot of excess wealth was created as a result. It had to go somewhere. It went into locomotive stocks in the London Stock Exchange. A bubble formed as a result. Because the locomotive was still in its infancy, the bubble burst which led to a stock market crash in 1850, followed by a series of minicrashes. The railroad industry ended up maturing in the 1880s and 1890s, when the railroad was in its heyday.
The next crash mentioned is the one the triggered the Great Depression in 1929. A second scientific wave began in 1879 when Thomas Edison in the lightbulb. Another seminal invention was the car. It wasn't until 1913 that Henry Ford invented the assembly line and brought forth the Model T. The electric and automotive revolutions of Edison and Ford proliferated throughout the world, creating excess wealth. Like before, this wealth had to go somewhere. It went into utility and automotive stocks on the US Stock Exchange. An unsustainable bubble formed which burst in 1929. This led to the Great Depression. After the economy recovered, the paving and electrification of America and Europe took place in the 1950s and 1960s.
The last crash mentioned in the book is the Crash of 2008. The current scientific wave began as a result of the Space Race. It is the high tech revolution that gave us the computer and the Internet. The wealth created as a result of the digital revolution went into real estate creating the housing bubble which burst in 2008. The wiring and networking of the world has not happened yet. The heyday of the information revolution has yet to come.
In addition, Michio Kaku predicts the possibility of a fourth scientific wave. He suspects it will involve artificial intelligence, nanotechnology, telecommunications, and biotechnology. This will create excess wealth which leads to a bubble that is likely to burst in 2087 before the heyday of the revolution comes.
This should be interesting to talk about. What do you think?