There are a zillion cultural moments that could be said to embody the decade that just ended, but the one that may be the best metaphor for the economic whiplash of the last 10 years is the ascent and crash of Who Wants To Be a Millionaire. Launched in the United States by ABC (modeled on a British program of the same name), Millionaire was such a phenomenon that the network decided to run it in prime time four nights a week. It seemed like an unstoppable entertainment juggernaut. Until, suddenly, it wasn't. Ratings cratered with Millionaire overload, and the show was canceled.
Who Wants To Be A Millionaire was the right show for the bubble decade"”an international phenomenon that itself spawned a weird entertainment bubble. Appropriately, ABC brought it back for a brief anniversary show last year"”a telling bit of nostalgia and maybe an early warning of what we have in store for the next decade. The '00s were a decade of startling economic expansion"”technology, housing, banking"”and subsequent catastrophe. The creation of these bubbles and their bursting became the new normal. It still is.
I've argued in previous columns that while American wring their hands over the shock that the bursting of such bubbles inevitably brings, they have come to expect and love those bubbles expanding on their way up. As emerging markets have taken some of the economic spotlight, the U.S. economy has come to resemble those markets in its boom and bust cycles. We have not reached the end of this cycle. A year ago, at the height of the bank panic, many folks talked about a new Great Depression or a prolonged malaise like that of the 1970s. Of course, there are those who expect this, as well as those who expect newly radiant heights of economic prosperity. I would put my bet on neither of those but on something in between: another bubble decade.
In retrospect, it's clear that the seeds of each of the bubbles of the '00s had already sprouted as the decade opened. The dot-com boom was, of course, already in full flower, and the related bubble in telecommunications was rapidly expanding"”the two together finally bursting and sending NASDAQ, the marketplace for many technology stocks, into a tailspin from which it never recovered. Housing had risen from the pit of the mid-'90s, and in some metro areas had already reached a level that was making them unaffordable to the middle class. The NationsBank-BankAmerica merger had already pointed the way to a wave of bank combinations and the bank bubble.
The natural thing to do in start-of-the-year or start-of-the-decade predictions is to look for the trends that will gather in strength and so to project what sectors of the economy will grow and which will crash. But the bubble economy has turned things on its head. A decade is plenty of time for a wave to rise, crest, and crash. The answers to "What trends will accelerate?" and "Which will blow up?" are largely the same.
If the next decade is anything like the last, the bubbles that we clearly see forming now will have fully inflated by the middle of the decade, pass any reasonable point of sustainability, and collapsed before the end. But being able to see them doesn't mean we will avoid them.
Want to reply to a comment? Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to.
Read Full Article »