Bubbles Come, Bubbles Go

A. Unabashed Pacifist:

If those who long for peace stood hand in hand, how far around the Earth could they reach? And if supposed “enemies” were holding one another’s hands?

B. Unabashed Christian:

Holy One,

So quickly the wrapping paper disappears.
Gradually the decorations go into hiding and Santa returns to where he belongs.
Too soon, the visitors go away.
Eventually the memories fade.
What remains?
You.
A shining hope in an otherwise darkened world.
What remains?
You.
A precious gift revealing the presence of divinity to an otherwise blind humanity.
What remains?
You.
A glorious song of praise in an otherwise tone-deaf humanity.
What remains?
You.
A message of peace and good will for an otherwise violent and selfish humanity.
You remain, and we are blessed anew because of Christmas.
Amen

C. Un-quoting Jesus:

“Fill out this application. I’ll let you know in a few days if you can be a disciple.”

[Maybe one question would have been about willingness to die for the cause, but He never said this.]

D. Blog: Bubble, Part 2

[From the article in Wikipedia, everything you need to know, according to economic theory and uncommon sense. I especially appreciate the fact that the bubble related to Beanie Babies has been recognized by this article.]

An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, or a speculative mania) is “trade in high volumes at prices that are considerably at variance with intrinsic values”.

While some economists deny that bubbles occur, the cause of bubbles remains a challenge to those who are convinced that asset prices often deviate strongly from intrinsic values. While many explanations have been suggested, it has been recently shown that bubbles appear even without uncertainty, speculation, or bounded rationality. Most recently, it has been suggested that bubbles might ultimately be caused by processes of price coordination or emerging social norms. Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst. Both the boom and the bust phases of the bubble are examples of a positive feedback mechanism, in contrast to the negative feedback mechanism that determines the equilibrium under normal market circumstances. Prices in an economic bubble can fluctuate erratically, and become impossible to predict from supply and demand alone.

Economic bubbles are generally considered to have a negative impact on the economy because they tend to cause misallocation of resources into non-optimal uses. In addition, the crash which usually follows an economic bubble can destroy a large amount of wealth and cause continuing economic malaise. A protracted period of low risk premiums can simply prolong the downturn in asset price deflation as was the case of the Great Depression in the 1930s for much of the world and the 1990s for Japan . Not only can the aftermath of a crash devastate the economy of a nation, but its effects can also reverberate beyond its borders.

Another important aspect of economic bubbles is their impact on spending habits. Market participants with overvalued assets tend to spend more because they "feel" richer (the wealth effect ). Many observers quote the housing market in the United Kingdom, Australia, Spain and parts of the United States in recent times, as an example of this effect. When the bubble inevitably bursts, those who hold on to these overvalued assets usually experience a feeling of poorness and tend to cut discretionary spending at the same time, hindering economic growth or, worse, exacerbating the economic slowdown. Therefore, it is imperative for the central bank to keep its eyes on asset price appreciation and take measures to curb high levels of speculative activity in financial assets. This is usually done by increasing the interest rate (that is, the cost of borrowing money).
It has been variously suggested that bubbles may be rational, intrinsic, and contagious. To date, there is no widely accepted theory to explain their occurrence. Recent computer-generated agency models suggest excessive leverage could be a key factor in causing financial bubbles.

Puzzlingly, bubbles occur even in highly predictable experimental markets, where uncertainty is eliminated and market participants should be able to calculate the intrinsic value of the assets simply by examining the expected stream of dividends. Nevertheless, bubbles have been observed repeatedly in experimental markets, even with participants such as business students, managers, and professional traders. Experimental bubbles have proven robust to a variety of conditions, including short-selling, margin buying, and insider trading.

While it is not clear what causes bubbles, there is evidence to suggest that they are not caused by bounded rationality or assumptions about the irrationality of others, as assumed by greater fool theory . It has also been shown that bubbles appear even when market participants are well-capable of pricing assets correctly. Further, it has been shown that bubbles appear even when speculation is not possible or when over-confidence is absent.
Popular among laymen but not fully confirmed by empirical research, greater fool theory portrays bubbles as driven by the behavior of a perennially optimistic market participants (the fools) who buy overvalued assets in anticipation of selling it to other rapacious speculators (the greater fools) at a much higher price. According to this unsupported explanation, the bubbles continue as long as the fools can find greater fools to pay up for the overvalued asset. The bubbles will end only when the greater fool becomes the greatest fool who pays the top price for the overvalued asset and can no longer find another buyer to pay for it at a higher price.

A related explanation is that economic bubbles are favored by the greed and irrational exuberance of overly bullish investors. The argument is that investors tend to extrapolate past extraordinary returns on investment of certain assets into the future, causing them to overbid those risky assets in order to attempt to continue to capture those same rates of return. Overbidding on certain assets will at some point result in uneconomic rates of return for investors; only then the asset price deflation will begin. When investors feel that they are no longer well compensated for holding those risky assets, they will start to demand higher rates of return on their investments.

Examples of economic bubbles include:
Tulip mania (top 1637)
The South Sea Company(1720)
Mississippi Company (1720)
Railway Mania (1840s)
Florida speculative building bubble (1926)
The Nifty Fifty American stocks of the late 1960s and early 1970s
Poseidon bubble (1970)
Sports cards and comic books in the 1980s and early 1990s
TY Beanie Babies (1996)
The Dot-com bubble (circa 1995–2001)
Japanes asset price bubble (1980s)
1997 Asian Financial Crisis (1997)

Real estate bubble:
British property bubble (as of 2006)
Irish property bubble (as of 2006)
United States housing bubble (as of 2007)
(The former Florida swampland real estate bubble)
Spanish property bubble (as of 2006)
Romanian property bubble (as of 2008)
Commodity bubble (as of 2008)

Exotic Livestock production in North America (i.e. llamas, white tail deer, elk, wild boar, and to a lesser extent bison)

Other goods which have produced bubbles include postage stamps and coin collecting.