Bubble Bubble Toil And Trouble?

man holding stick making bubbles beside body of water

Source: Unsplash

Or maybe not.

So recently there has been a lot of buzz that we may be seeing a variety of speculative bubbles in the US and in the world economy. Many asset markets have risen in the last few months, with several of them either reaching new highs or getting close to doing so, with some of them rising very sharply quite recently, with all of this making many eyebrows rise to noticeable degrees and mumble about possible crashes, which could well happen in any of these markets. But probably not in all of them.

One is of course the US stock market, which has hit new record highs recently for most of its indices, with the Dow, in particular, making headlines when it passed 30,000, where it still is, if not at a record high level at this very moment. It is ironic that President Trump spent so much time and effort focusing on the stock market, apparently engaging in stupid and ultimately deeply deadly policies regarding the pandemic out of a silly effort to affect favorably almost daily stock market movements. People were not to be told how serious things were because, wow, the stock market might go down tomorrow and his reelection chances would be damaged! Well, of course, when how serious things finally became clear in March, we did see a massive plunge of world stock markets, but a combination of Federal Reserve policy actions and a fiscal stimulus, along with the passing of the first wave of the pandemic, led the markets to recover quite rapidly from their horrific fall. They generally continued to do not too bad even as we had another increase in the pandemic in the summer, which was probably just the spreading of the first wave into parts of the country that did not get it in March and April, especially parts where governors followed Trump in not enforcing masks and social distancing.

Of course, it is probably the case that what has driven the most recent surge, including the passing of the 30,000 Dow barrier, has been driven by good news about vaccines becoming available, with this providing hope for a more solid recovery of the economy sometime next year. However, much as Trump has whined that he deserves credit for all this (and he deserves some) and that if only those naughty companies had made their announcements two weeks earlier he would have gotten reelected, well, the real proof of the pudding is that stock market began moving up sharply in the immediate wake of the election with the word that Biden had won, before the announcement of the Pfizer vaccine, which led to Trump engaging in all sorts of tangled efforts to claim credit for that.

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