flipper:

No, you're manufacturing a convenient scenario and then claiming it's
'the only problem' but it isn't.

So you only need to provide a couple of examples to demonstrate that I'm
wrong.

Global warming is a fraud.

Really?

It has only two merits. First of all, it was invented by Maggie (Thatcher,
not Simpson) herself, therefore it must be good.

Secondly, it is a myth, but much more founded (so to speak) than the
superstition that nuclear power (the only real alternative to fossil fuels)
is more dangerous than fossil. And, since nuclear power does not produce
greenhouse gases...

But 'easy money' would prevent the avalanche because re capitalization
is easier.

Exactly. That's how two recessions were averted by the FED.
Then, when the easy money made the dollar sink from the initial 0.8 for one
Euro, to the current 1,3 and you start to pay too dearly feedstock, you
have to stop printing dollars, thus starting a bigger and meaner avalanche.

Your scenario swings both ways.

It swings where is is pushed to. For as long as you can push it.
Then, as we say here, "the comb gets to the knots".
Or, if you like it better, the pendulum swings back.

That's exactly how it goes. But the fact that a sector is more profitable
than another means that the demand exceeds the supply.

Not necessarily. They may simply be more efficient.

No way. That is the case of competitors in the same sector, not of a whole
sector.

The reason the more
profitable sector requires investments is that it needs to produce more to
earn more,

It doesn't necessarily 'require investment as a rising stock price is
how companies can pay off the investment already made.

They can provided demand exceeds supply. Otherwise they will reduce the
price to keep their numbers high so they can continue to take advantage of
their investments, up to the point where they cannot repay the investments.

but this will, sooner or later, make the supply exceed the
demand, with the consequent drop in prices below what's needed to run the
factory *and* repay the capital.

Or the price eventually settles to the minimum necessary to cover
costs, repay capital, and earn a competitive profit margin.

This would be true if all the competitors made the same investment at the
same time. But there will always, luckily, be an enterprise that will spoil
the party with a bigger (ore more technologically advanced) investment
designed to gain market share.

It just isn't the case that everyone goes from gangbusters to bust.

The gangbusters can also gain market share and make competitors go bust.

Well, you don't get impressive revenues by losing money, no matter how
'easy' you got it to begin with.

Who can lose money, while dotcom shares' value continues to senselessly
climb and house prices go up?

Which was the most succesful US bank, 1995-2005? How is it doing now?
Can you believe that the Economist search does not return anything for
"Citybank" nor "Citygroup"??

If you are an investor you can sell the shares. But, if you are a bank, you
can't.

Actually, they can and do. That's part of the derivatives market.

You're right.

So why did they take so much money?

People like money, that's what

I assume you meant "why", not "what", otherwise I did not understand what
you meant to say.

you don't have to 'pay' them to take it.

And what do they do with that money? They bathe in it as Scrooge McDuck?

To invest in the NASDAQ on companies
that did not make a dime of dividends.

Someone obviously had an expectation they would... some day.

Because they did not have the faintest idea of what they were "investing
about".

When there is a lot of demand (money
to be invested because it did cost little and there was plenty), the price
of the good (dotcom shares) is bound to rise, even if it's crap.

People don't bid up things they think are worthless, even if the money
they have was 'cheap'.

They do, yes, they do it by all means all of the time. Not only naive
investors, but even financial institutions. Have you ever heard of
stock-tracking software, like the one that caused the financial crisis of
1987? It does not know anything about the company, only records the
"resistances" and the "supports", as a lot of low-level brokers do. And
that kind of software is still being studied and improved.

I think we share the opinion they're probably related to government
policy but maybe not the same ones.

Exactly. Do you have an alternative scenario or you simply don't buy mine?

So were the economic cycles came from?

I think they come from sudden market perturbations. Making waves, so
to speak.

Waves decay, if there's no wind.

Take a generally accepted classic case: war. There is a sudden shift
from one mode of operation to another and then the war is over.

I can't see the similitude.

I think many are government induced, like the 1970's oil crisis
(whether you consider that induced by foreign governments or, in the
US, deliberate policy suppressing gasoline prices till the embargo
burst the bubble).

"Yom Kippur", "Camp David" and "retaliation" don't mean anything to you?
;-)

'Money' these days is not tied to any particular asset (as in gold) so
how does one know how much to print? It's all based on 'the economy'.

Including macroscopic bubbles.

Provided you let the down cycle happen and don't avoid it by injecting tons
of cheap money, otherwise, for instance, the dotcom bubble migrates to
housing.

It's my opinion the housing 'problem' would not have happened had it
not been for government sponsorship of 'liar loans'.

That, and the injection of excessive liquidity. Or, maybe, the "liar loans"
were theirselves the injection of excess money, if they entailed also
"governmental insurance" of the loan.

After all, money is just a soemthing (coin, bill, fund transfer from a bank
"guaranteed by government" and the seller of the house) worth what
government decides.

When the market is awash with money the best return is already taken and
you still have a lot of cheap (or with negative real rate, factoring in
inflation) money to invest, you turn to riskier investments.

Or you drive up the price of the good ones.

Thus turning them to bad (low return) ones.

That may be why I've never seen it because, knowing he's either a liar
or propagandist, I avoid Oliver Stone movies. I had not intended to
watch JFK either and only did because it became a 'national topic'.

Well, The Arafat stuff was probably (I haven't seen that JFK) much
"better", since he had even more a free hand at making up "facts".

I told you about my mather being convinced by a "philosopher" on the radio
that the left cares more about the individual then the right.

Well, the left always makes that claim

Yeah, that's why they are named "socialists".

Sounds like Michael Moore making 'documentaries' on how 'superior'
Cuba's medical system is to that in the US.

I missed that, for the same reason you missed Arafat.

Utter crap.

Really?