September 7, 2009

Bursting the Government Bubble

By Alan Aronoff
In the last decade, we have witnessed the bursting of two bubbles, the stock market bubble driven by internet stocks with unsustainable business models and valuations, and more recently, the private debt bubble that has resulted in the destruction of credit along with real estate values. America is now engaged in the unprecedented growth in government accompanied with unprecedented debt at the federal level. The Federal Reserve in cooperation with both the Bush Administration in its final days and now the Obama administration is propping up the credit markets with over $1.0T including the TARP funds, and open market  purchases of the US debt obligations. Can the too big to fail hypothesis for the big banks also be applied to the Federal government?The table below shows the history of the Japanese Tokyo stock market before and after its bubble burst in 1990. TOPIX COMPOSITERef: FEB. 9, 2009 = 1000  And, the table below shows the history of the NASDAQ from 1995 to the...(Read Full Article)