Bubbles and the United States
A market economy, ever since its inception, has always been prone to streaks of speculative manias. Ranging from simple commodity goods to complex financial derivatives, the target of speculation frenzies can vary depending on a single investor’s whim. The initial rush of economic bubbles yields enormous feelings of euphoria categorized by all those familiar stories of sudden burst of wealth. As more rational individuals abandon their better judgment in order to participate in this price driven game, there is a point when the upward rise of price loses its momentum. Then the eventual and inevitable crash hits, and mass panic occurs. In the same spectacular fashion that made some people millionaires overnight, the crash reduces millionaires to paupers. Daniel Gross in his novel Pop! Argues that the United States have a propensity for bubbles in which gives the U.S. economy a competitive edge over other nations. However, Gross exaggerates the benefits of bubbles and understates the severity of economic fallout of the bubble burst. Yet, there is indeed a causal relationship between bubbles and the dynamism of the U.S. entrepreneurial spirit.
Gross writes that: “the tales of short-term woe experienced by bubble-burned investors, who constitute a minority of the population, frequently overlook the substantial long-term benefits that accrue to everyone, and to the economy at large, in the years after.” Bubbles can indeed be beneficial in the long run when it spurs the development of new commercial and consumer infrastructure. Such is the case for the telegraph, railroad, and the internet. These bubbles ushered a new mode of communication and transportation that revolutionized the national market for goods and services. Bubbles in these cases helped to fasten the adoption of the new technology and dispersed the benefits to the masses. To illustrate this point, Gross compares the development of the railroads to modern day internet. It was... [continues]
A market economy, ever since its inception, has always been prone to streaks of speculative manias. Ranging from simple commodity goods to complex financial derivatives, the target of speculation frenzies can vary depending on a single investor’s whim. The initial rush of economic bubbles yields enormous feelings of euphoria categorized by all those familiar stories of sudden burst of wealth. As more rational individuals abandon their better judgment in order to participate in this price driven game, there is a point when the upward rise of price loses its momentum. Then the eventual and inevitable crash hits, and mass panic occurs. In the same spectacular fashion that made some people millionaires overnight, the crash reduces millionaires to paupers. Daniel Gross in his novel Pop! Argues that the United States have a propensity for bubbles in which gives the U.S. economy a competitive edge over other nations. However, Gross exaggerates the benefits of bubbles and understates the severity of economic fallout of the bubble burst. Yet, there is indeed a causal relationship between bubbles and the dynamism of the U.S. entrepreneurial spirit.
Gross writes that: “the tales of short-term woe experienced by bubble-burned investors, who constitute a minority of the population, frequently overlook the substantial long-term benefits that accrue to everyone, and to the economy at large, in the years after.” Bubbles can indeed be beneficial in the long run when it spurs the development of new commercial and consumer infrastructure. Such is the case for the telegraph, railroad, and the internet. These bubbles ushered a new mode of communication and transportation that revolutionized the national market for goods and services. Bubbles in these cases helped to fasten the adoption of the new technology and dispersed the benefits to the masses. To illustrate this point, Gross compares the development of the railroads to modern day internet. It was... [continues]
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