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The next economic Bubble

MouthWash
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11/28/2012 9:42:20 AM
Posted: 4 years ago
What happens, precisely, when the bubble bursts (for someone ignorant of the subject)?

And what could this mean for me if I plan on going to college?
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darkkermit
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11/28/2012 9:55:13 AM
Posted: 4 years ago
No.

Reasons:

Unlike in the housing bubble, there's no "greater fool" to pass the bill over to. One of the theories on bubble formation requires a greater fool, but there's none in the case of education.

This person is pretty smart when it comes to finance and economics. He predicted the housing bubble, but doesn't believe in an education bubble.
http://www.halfsigma.com...

Also those with a bachelors degree earn significantly more the high school graduates:

http://wac.0873.edgecastcdn.net...

Default on student loans is also at an all time low:

http://big.assets.huffingtonpost.com...
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bossyburrito
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11/29/2012 2:46:50 PM
Posted: 4 years ago
No, the next bubble will be the NEW DOT COM ERA after the sun shites on our electronics in November.
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lannan13
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11/29/2012 6:20:09 PM
Posted: 4 years ago
I believe those who finish in the top 5% of there class should get a free 4 year schalarship to any school of their choice.
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imabench
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11/29/2012 6:42:23 PM
Posted: 4 years ago
At 11/29/2012 6:20:09 PM, lannan13 wrote:
I believe those who finish in the top 5% of there class should get a free 4 year schalarship to any school of their choice.

if 95% of your school is full of complete morons though then the other 5% isnt really 'smart' they just arent idiots.
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ax123man
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11/29/2012 8:48:23 PM
Posted: 4 years ago
disagree. Education grows as government grows - slow but sure.

One possible exception could happen: people wake up and figure out that it's really accreditation that is valuable. Education is separate and less valuable because it can be effectively delivered to mass audiences over the net. In many cases people can educate themselves, depending on the subject.

Next bubble: bonds. Interest rates can't stay low forever (can they?)
lewis20
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11/29/2012 9:39:37 PM
Posted: 4 years ago
At 11/29/2012 6:42:23 PM, imabench wrote:
At 11/29/2012 6:20:09 PM, lannan13 wrote:
I believe those who finish in the top 5% of there class should get a free 4 year schalarship to any school of their choice.

if 95% of your school is full of complete morons though then the other 5% isnt really 'smart' they just arent idiots.

Ya there's a pretty huge discrepancy between schools and different distributions within the schools.
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lewis20
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11/29/2012 9:42:27 PM
Posted: 4 years ago
I have wondered if there were a way to bet against a sort of education bubble though.
There's no denying a majority of degrees going out today aren't the costs. However the debt burden of the degrees will forever and always fall on the debt holder so I'm not sure who you'd bet on.
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Wallstreetatheist
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11/30/2012 2:01:25 AM
Posted: 4 years ago
At 11/29/2012 6:04:19 PM, FREEDO wrote:
Gold.

Frankincense resin is also a bubble.
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Wallstreetatheist
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11/30/2012 2:02:58 AM
Posted: 4 years ago
At 11/29/2012 8:48:23 PM, ax123man wrote:
Next bubble: bonds. Interest rates can't stay low forever (can they?)

If you're talking about government bonds... MMT Economists think so, but most everyone else disagrees.
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darkkermit
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11/30/2012 9:24:15 AM
Posted: 4 years ago
At 11/29/2012 8:48:23 PM, ax123man wrote:
disagree. Education grows as government grows - slow but sure.

One possible exception could happen: people wake up and figure out that it's really accreditation that is valuable. Education is separate and less valuable because it can be effectively delivered to mass audiences over the net. In many cases people can educate themselves, depending on the subject.

Next bubble: bonds. Interest rates can't stay low forever (can they?)

Yes, I agree with the bonds.

They can have low interest forever, but that would lead to hyperinflation.
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Greyparrot
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11/30/2012 10:55:06 AM
Posted: 4 years ago
It's not like the governement is making a profit off of student loans.

The government has worse things to worry about than a decline in college loans.
johnnyboy54
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11/30/2012 1:04:59 PM
Posted: 4 years ago
At 11/29/2012 6:04:19 PM, FREEDO wrote:
Gold.

Gold will likely decrease in value when the economy fully turns around. Gold appears to be a counter-cyclical investment. But I don't think it really qualifies as an investment.
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twocupcakes
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11/30/2012 1:34:22 PM
Posted: 4 years ago
I don't think education loans is really a bubble. I don't think gold is really a bubble per say but people find it valuable in uncertain times (like now). Yet, if the economy picks up gold should decrease.

The most likely new bubble is new technology stocks. It seems every time a new technology comes up, there is a bubble as in the radio stocks of the 1920s, internet stocks of the 90s and recently facebook.
twocupcakes
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11/30/2012 1:35:42 PM
Posted: 4 years ago
At 11/30/2012 9:24:15 AM, darkkermit wrote:
At 11/29/2012 8:48:23 PM, ax123man wrote:
disagree. Education grows as government grows - slow but sure.

One possible exception could happen: people wake up and figure out that it's really accreditation that is valuable. Education is separate and less valuable because it can be effectively delivered to mass audiences over the net. In many cases people can educate themselves, depending on the subject.

Next bubble: bonds. Interest rates can't stay low forever (can they?)

Yes, I agree with the bonds.

They can have low interest forever, but that would lead to hyperinflation.

I am curious, how does low interest rates lead to hyperinflation? I was under the impression that high interest rates lead to hyper inflation.
16kadams
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11/30/2012 10:07:05 PM
Posted: 4 years ago
At 11/29/2012 2:46:50 PM, bossyburrito wrote:
No, the next bubble will be the NEW DOT COM ERA after the sun shites on our electronics in November.

?
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16kadams
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11/30/2012 10:07:32 PM
Posted: 4 years ago
At 11/29/2012 6:04:19 PM, FREEDO wrote:
Gold.

^
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
ax123man
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11/30/2012 11:04:24 PM
Posted: 4 years ago
They can have low interest forever, but that would lead to hyperinflation.

I am curious, how does low interest rates lead to hyperinflation? I was under the impression that high interest rates lead to hyper inflation.

Money printing both lowers interest rates and causes inflation. I suppose low interest also increases the velocity of money too:

MV = PQ

How would high interest cause hyperinflation?
twocupcakes
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12/1/2012 8:02:57 AM
Posted: 4 years ago
At 11/30/2012 11:04:24 PM, ax123man wrote:
They can have low interest forever, but that would lead to hyperinflation.

I am curious, how does low interest rates lead to hyperinflation? I was under the impression that high interest rates lead to hyper inflation.

Money printing both lowers interest rates and causes inflation. I suppose low interest also increases the velocity of money too:

MV = PQ

How would high interest cause hyperinflation?

Okay cool. I think I misunderstood. I was thinking that the interest rate is related to inflation, so if there is low inflation there will low interest rates. And high inflation, high interest rates.

However, right now both inflation and interest rates are low, so I do not think hyperinflation is a worry.
lewis20
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12/1/2012 9:59:23 AM
Posted: 4 years ago
At 12/1/2012 8:02:57 AM, twocupcakes wrote:
At 11/30/2012 11:04:24 PM, ax123man wrote:
They can have low interest forever, but that would lead to hyperinflation.

I am curious, how does low interest rates lead to hyperinflation? I was under the impression that high interest rates lead to hyper inflation.

Money printing both lowers interest rates and causes inflation. I suppose low interest also increases the velocity of money too:

MV = PQ

How would high interest cause hyperinflation?

Okay cool. I think I misunderstood. I was thinking that the interest rate is related to inflation, so if there is low inflation there will low interest rates. And high inflation, high interest rates.

However, right now both inflation and interest rates are low, so I do not think hyperinflation is a worry.

Artificially low interest rates lead to inflation, not necessarily just low interest rates.
Right now real inflation is higher than the 3 percent the cpi claims , closer to 8 percent.
"If you are a racist I will attack you with the north"- Abraham Lincoln

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lewis20
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12/1/2012 2:57:52 PM
Posted: 4 years ago
At 12/1/2012 11:45:00 AM, twocupcakes wrote:
What measure of inflation you using, I always thought CPI overstates inflation as it does not account for substitute goods?

CPI understates inflation which favors the govt. CPI includes big ticket items like cars and houses but doesn't include everyday items like gas and groceries. I don't remember the specifics
"If you are a racist I will attack you with the north"- Abraham Lincoln

"Do not wear clothing woven of two kinds of material" - Leviticus 19 19

"War is a racket" - Smedley Butler
twocupcakes
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12/1/2012 4:57:08 PM
Posted: 4 years ago
At 12/1/2012 2:57:52 PM, lewis20 wrote:
At 12/1/2012 11:45:00 AM, twocupcakes wrote:
What measure of inflation you using, I always thought CPI overstates inflation as it does not account for substitute goods?

CPI understates inflation which favors the govt. CPI includes big ticket items like cars and houses but doesn't include everyday items like gas and groceries. I don't remember the specifics

FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

http://www.bls.gov...

The CPI does include groceries and gasoline.In fact many say the CPI overstates purchasing power because it does not include substitute goods. So, if apple juice goes up and orange juice does not, in actuality people will substitute orange juice instead and spend less.
lewis20
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12/1/2012 5:17:32 PM
Posted: 4 years ago
At 12/1/2012 4:57:08 PM, twocupcakes wrote:
At 12/1/2012 2:57:52 PM, lewis20 wrote:
At 12/1/2012 11:45:00 AM, twocupcakes wrote:
What measure of inflation you using, I always thought CPI overstates inflation as it does not account for substitute goods?

CPI understates inflation which favors the govt. CPI includes big ticket items like cars and houses but doesn't include everyday items like gas and groceries. I don't remember the specifics

FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

http://www.bls.gov...

The CPI does include groceries and gasoline.In fact many say the CPI overstates purchasing power because it does not include substitute goods. So, if apple juice goes up and orange juice does not, in actuality people will substitute orange juice instead and spend less.

It was core CPI that didn't include food and energy.
Where do you get this overstating purchasing power because of substitute goods? Substituting goods isn't going to affect CPI unless it's a move from an item on the list to an item not on the list, or vice versa. If that's the case the consumer migration would lessen the demand and therefore the price.
"If you are a racist I will attack you with the north"- Abraham Lincoln

"Do not wear clothing woven of two kinds of material" - Leviticus 19 19

"War is a racket" - Smedley Butler
twocupcakes
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12/1/2012 5:35:28 PM
Posted: 4 years ago
Its an argument I have heard. The CPI weights all goods equally, yet in real life consumers increase the weight of the cheapest goods and decrease the most expensive goods. So, if for example, if peas go up 10% and corn 2%, the CPI could calculate a 6% increase in goods(equally weighted). Yet, it is likely consumers would decrease the amount of corn and get more peas so consumers may actually only pay say 4% more, when CPI calculates 6%.
lewis20
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12/1/2012 6:43:50 PM
Posted: 4 years ago
At 12/1/2012 5:35:28 PM, twocupcakes wrote:
Its an argument I have heard. The CPI weights all goods equally, yet in real life consumers increase the weight of the cheapest goods and decrease the most expensive goods. So, if for example, if peas go up 10% and corn 2%, the CPI could calculate a 6% increase in goods(equally weighted). Yet, it is likely consumers would decrease the amount of corn and get more peas so consumers may actually only pay say 4% more, when CPI calculates 6%.

If consumers moved from peas to corn then demand for corn would go up and the demand for peas would go down, raising the price of corn and decreasing the price of peas.
"If you are a racist I will attack you with the north"- Abraham Lincoln

"Do not wear clothing woven of two kinds of material" - Leviticus 19 19

"War is a racket" - Smedley Butler
twocupcakes
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12/1/2012 7:11:18 PM
Posted: 4 years ago
That might affect it a bit, but the argument still stands. Is it your contention that the prices of substitute goods change the same?