One would not have thought it
possible for the internet bubble of the late
1990s, the greatest boom in the history of the world, to be replaced within five
years by a real estate bubble of even greater magnitude and worse stupidity.
Under more normal circumstances, one would not have thought that the same
mistake could happen twice in the lifetimes of the people involved…
The most straightforward explanation begins with the view that all of these
bubbles are not truly separate, but instead represent different facets of a
single Great Boom of unprecedented size and duration. As with the earlier
bubbles of the modern age, the Great Boom has been based on a similar story of
globalization, told and retold in different ways
– and so we have seen a rotating series of local booms and bubbles as investors
price a globally unified world through the prism of different markets.
Nevertheless, this Great Boom is also very different from all previous bubbles.
This time around, globalization either will succeed and humanity will achieve a
degree of freedom and prosperity that can scarcely be imagined, or
globalization will fail and capitalism or even humanity itself may come to an
end. The real alternative to good globalization is world war. And because of
the nature of today
‘s technology, such a war would be apocalyptic in the twenty-first century. Because there is not much time left, the Great Boom, taken as a whole, either is
not a bubble at all, or it is the final and greatest bubble in history.
This also means that catastrophic risk has never been higher and the peso problem — changing small probabilities of total collapse — is screwing around with asset prices to an unprecedented degree. Here is the full essay, which also has much of value on China, among other topics. If nothing else, remember this:
…there is no good scenario for the world in which China fails.
“China” position is not a forecast that financial globalization will succeed, but
rather a bet that its internal contradictions will persist.
The hat tip is from wunderkind Ben Casnocha.