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(The Year 2012 In Review)
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|User Info||That Is Not Rain (Peter Orszag); entered at 2012-05-02 20:42:07|
Registered: 2009-02-28 DFW, Tx
Bernanke must be stupid. The dotcom bubble was air. One group won, those that sold the stock and one group lost, those that bought the stock. And, not all of them lost. There was no link from the stock to a bank account. This was different than the 29 bust, which was levered 9 to 1, wiped out trade accounts and immediately took money out of circulation. People could sit on their stock and they didn't have to make payments. If they had a margin call, they were sold out. They just lost their money. It was money another person had. I think margin debt in the entire market was something arouond $200 billion, from what I recall. It was a 1 year trip up the shoot and I doubt many people actually went out and spent the money.|
The housing bust was entirely different. The entire game was financed. There were payments to be made. The appreciation was borrowed out by the hundreds of billions every year. Equity flowed as spendable cash into the economy. When it went bust, bad debt inundated the economy. Unlike the stock market, people were living in their wealth effect and I doubt many go out and spend money because their house was worth more, save for those that were borrowing their equity. One was a mania, the other just a long, drawn out bubble. Bernanke is confusing wealth with money and credit. He asked a question that even a deaf dog could answer.