08-18-2016, 05:55 AM
Here is one of the hazards of going outside one's field of expertise and using techniques from such an area as physics or mathematics to study somethint else. Brilliant as Michio Kaku is, he may miss some of the big story.
The extinction of extraordinary profits from technological innovation may be one contributor, but I have seen other patterns.
1. Exhaustion of opportunities. Just before the Crash of 2008, energy prices soared because speculation on petroleum prices was one of the last few remaining possibilities (energy prices spiked only to crash; I saw gasoline at $5.49 a gallon in rural Michigan in the summer of 2008) for investment. That's after people had huge profits from speculative gains and no obvious chance of making any more gain from the subprime scam in real estate lending.
In 1929 people were betting on crazy investments because sane investments had below-average returns on investment.
2. Completion of big projects that devour bulk commodities and hire huge numbers of construction workers. The economic downturn of 1937 follows the end of such bridge products as the Golden Gate and Trans-Bay bridges in the San Francisco Bay Area and the George Washington bridge across the Hudson, and the completion of the Hoover Dam, all intended to create huge numbers of jobs while meeting basic needs in transportation or control of water. Construction is the largest variable use of steel, concrete, and glass; a big project such as the Big Dig of Boston ended just before the Crash of 2008. When the project is over the steel mills, concrete plants, and glass manufacturers lose a steady and lucrative stream of revenue. Smaller crashes followed the completion of the Mackinac Bridge and the Verazzano Bridge. Economic booms often coincide with big construction projects, and economic busts follow their ends. Construction workers are laid off, mills scale back production, and steel workers lose jobs.
3. The bubbles themselves. Friedrich Hayek points this one out: bubbles do not so much create wealth as they devour it. The bubble itself is the calamity because it can do little good while ensuring that investment capital that could go into more mundane (but useful) activities goes into the bubble. While Americans were over-investing in real estate in the Double-Zero decade they were under-investing in plant and equipment. Hayek (with whom I disagree on many other issues) recognizes that the Crash is only the recognition that the investments in the bubble are pure waste.
4. Economic scandals. Enron Corporation is a prime example.
The extinction of extraordinary profits from technological innovation may be one contributor, but I have seen other patterns.
1. Exhaustion of opportunities. Just before the Crash of 2008, energy prices soared because speculation on petroleum prices was one of the last few remaining possibilities (energy prices spiked only to crash; I saw gasoline at $5.49 a gallon in rural Michigan in the summer of 2008) for investment. That's after people had huge profits from speculative gains and no obvious chance of making any more gain from the subprime scam in real estate lending.
In 1929 people were betting on crazy investments because sane investments had below-average returns on investment.
2. Completion of big projects that devour bulk commodities and hire huge numbers of construction workers. The economic downturn of 1937 follows the end of such bridge products as the Golden Gate and Trans-Bay bridges in the San Francisco Bay Area and the George Washington bridge across the Hudson, and the completion of the Hoover Dam, all intended to create huge numbers of jobs while meeting basic needs in transportation or control of water. Construction is the largest variable use of steel, concrete, and glass; a big project such as the Big Dig of Boston ended just before the Crash of 2008. When the project is over the steel mills, concrete plants, and glass manufacturers lose a steady and lucrative stream of revenue. Smaller crashes followed the completion of the Mackinac Bridge and the Verazzano Bridge. Economic booms often coincide with big construction projects, and economic busts follow their ends. Construction workers are laid off, mills scale back production, and steel workers lose jobs.
3. The bubbles themselves. Friedrich Hayek points this one out: bubbles do not so much create wealth as they devour it. The bubble itself is the calamity because it can do little good while ensuring that investment capital that could go into more mundane (but useful) activities goes into the bubble. While Americans were over-investing in real estate in the Double-Zero decade they were under-investing in plant and equipment. Hayek (with whom I disagree on many other issues) recognizes that the Crash is only the recognition that the investments in the bubble are pure waste.
4. Economic scandals. Enron Corporation is a prime example.
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.