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Thread: Ron Paul Blows Away Conventional Thinking About Economic Bubbles

  1. #1

    Ron Paul Blows Away Conventional Thinking About Economic Bubbles

    Ron Paul Blows Away Conventional Thinking About Economic Bubbles

    The John Birch Society
    June 12, 2008


    ARTICLE SYNOPSIS:

    In a new article written exclusively for The New American magazine, Congressman Ron Paul explains a primary cause of our current economic troubles and what to do about it.

    Follow this link to the original source: "“Economic Bubbles”"

    COMMENTARY:

    Bubbles are fun. Kids love to blow them, Lawrence Welk apparently thought they were “wunnerful,” and Don Ho felt happy about the tiniest of bubbles in his beverage of choice. Reuters reports that even scientists like them so much that they are finding ways to make them last longer.

    But there is at least one kind of bubble that no likes to see: economic bubbles. Thanks to Ron Paul’s new article on this topic — written exclusively for The New American magazine — a primary cause of these undesirable bubbles is now understandable to anyone. Simply and straightforwardly entitled "Economic Bubbles," Dr. Paul’s explanation of how housing and other bubbles form is also straightforward and easy to grasp. Addressing not only a major cause of these bubbles but also the solution, this is a complete package that has the potential to change the way Americans look at the economy, the Federal Reserve, and the government’s role (or lack thereof) in minimizing downturns.

    Maybe it is best to let Dr. Paul speak for himself:

    Politicians still fail to understand both the origins of economic instability and the proper solution. Rather than getting government off people’s backs, their reflexive reaction is to get government more involved, creating new programs and bureaucracies, implementing new regulations, and spending billions more of the taxpayers’ hard-earned money. Only a sea change in congressional thinking will bring most members around to understanding that the proper way to deal with an economic crisis is to lower taxes, loosen regulation, and keep the government’s hands off the economy.

    There you have it in a nutshell, or perhaps in a tiny bubble. Now go stick some bubble gum in your mouth, turn on your bubble machine, put on a little Lawrence Welk music, pour a glassful of your bubbly beverage of choice, and click on the link to The New American website. This is one article that just might pop your preconceptions and blow you away.

    Wunnerful, wunnerful — thank you, Dr. Paul!


    SOURCE:
    http://www.jbs.org/node/8364
    ----

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  3. #2
    A quote from the article:

    "Bubbles originate with the Federal Reserve’s interest rate manipulation and loose monetary policy, which always lead to malinvestment"
    While the Fed makes bubble worse via inflation, and the Fed's misguided policies extend and enhance bubbles, what created the Dutch Tulip Mania of the 1630's?

  4. #3
    Bubbles come from when people find something that they believe will generate higher than normal profits. They buy that thing expecting the price to go higher than other items so that they can sell it later for a gain. Higher profits draw in more people seeking to make money and they bid up the price of it. The higher rising price from all these other people buying in, the more money attracts and it grows bigger and faster. Finally, there is not new money coming in because either the price is simply too high or people have no more money to put into it. Once the price starts to head down, the buyers get scared and want their money back or to get as much of the profit they already have so they dump their holdings and the price collapses- the bubble pops.

    Actions by the government or the Fed can create market imbalances that can trigger either the growth or popping of the bubble, but even if you get rid of the Fed and government, the psychological effects of bubbles will not go away and they will continue to occur.

  5. #4
    dutch tulip mania = market hystria meets in~crowd trendiness

    desire and supply put pressures on the tulip growers, then a shift in
    the demand and an overabundance of last years favorite sometimes
    bankrupted people. someone pegging a trend made out like a bandit!

  6. #5
    Quote Originally Posted by Zippyjuan View Post
    Bubbles come from when people find something that they believe will generate higher than normal profits.
    Not to disagree with Ron, but it seems that market manias or "bubbles" are completely independent from "Fed Reserve policies". And neither are "good" for most people, i.e. investors, savers or workers...

  7. #6
    Exactly what I was trying to say. The Fed or government by their actions can make a bubble worse or less but they do not have to be involved for a bubble to occur. Usually the ones who make money are the ones who got in early and got out in time. The second part is the toughest. If something is still going up in price it is hard to sell it and you want to buy more.



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