About a year ago, I used the term "Omnibubble" to refer to an all-encompassing financial bubble inflated around the world's economies.  I'm not claiming first use of this term though I've been consistent in its usage in many posts and articles since September 2018.  [Ed. note: cf Martin Wolf in the FT, 2017]

Few areas of the economy can escape the Omnibubble's grip, apparently not even taxi drivers in New York City.  While many would point to Uber and Lyft for the deteriorating fortunes of NYC cabbies, there's more to it than their less regulated competitors. 

To understand the Omnibubble, I'll refer to Escaping Oz: Navigating the Crisis to illustrate the elements needed to create it.

1. Favorable public psychology
2. Herding Instinct
3. Means to speculate with credit

For the privilege of driving a cab in NYC, drivers had to purchase medallions which peaked at $1.3 million in 2014.  The auction for the medallions was plump with demand (favorable public psychology).  The profession attracted a large portion of immigrants (herding instinct).  Since the auction bidders were unlikely to have the necessary capital, they found willing lenders (means to speculate with credit).  Credit means nothing unless there are willing borrowers and lenders — both were present.  Once the bubble is fully inflated, the psychology that built it deteriorates and there's the ensuing aftermath.  

What happens in the aftermath of the bubble?  

1. Collapsing prices
2. Recrimination of "guilty" parties
3. Government attempts to restore confidence

We have all of these elements in the taxi medallion story.  I remember looking at a price chart of medallion prices back in 2014 and it had that distinctive parabolic shape that spelled a collapse.  Current medallion pricing is available at this web site though I've read some drivers who claim their medallion is only worth $100,000 (collapsing prices).  Ninety percent (90%) price collapses are not uncommon in bubble economics.  The Taxi Workers Alliance, a 22,000 member organization, has a plan to help the "guilty" parties (City of New York) bail out those saddled with crushing medallion debt — they want the city to buy medallion debt at a discount.  The mayor has pushed back on that plan since it would break the city's budget.  According to the Taxi Workers Alliance, since the city reaped millions from medallion sales, they should be responsible for solving the problem (recrimination of "guilty" parties).  The mayor of New York, Bill De Blasio, has called on the federal government to bail out the cabbies (government attempts to restore confidence).  

Unfortunately, this story will end as others have with bankruptcies, fire sale prices of medallions, and the inevitable clash of politics and economics, a central theme in the Escaping Oz series.  The Omnibubble has impacted many areas that in retrospect seem obvious, like the world of art.  The human brain is not predisposed to rational thought when it comes to investments.  Investors think they're using the logical part of their brain (prefrontal cortex) when in fact they're using their emotional center (amygdala).  They later build justification for their emotional actions.  

Ironically, many of these cab drivers will likely witness the collapse of market values of their competitors, Uber and Lyft who are also within their own financial bubble.  There will be a restructuring in the private car transportation business (blockchain-based, autonomous vehicles) that will reshape the landscape in the future.  The Omnibubble will not discriminate on the way up or down.  We saw this movie in 2008 and we'll see it again.