The biggest bubble of all

April 23, 2015: This post has been updated and corrected inline.

A couple more articles have popped up recently suggesting we’re in a bubble. Joe Kokura points to “the nervous predictions from the very big-name venture capitalists whose money is financing this current [tech] boom.”[1] That’s well worth paying attention to because it was when the venture capitalists folded up their checkbooks in 2000 to 2001 that the dot-com boom turned to bust. (Update, April 23, 2015: While some analysts point to significant revenue growth and cash on hand at some big name tech firms to rationalize this performance, “A surge in tech stocks helped push the Nasdaq composite index to an all-time high Thursday [April 23, 2015], eclipsing a record set at the peak of the dot-com boom 15 years ago. . . . The Nasdaq edged up 20.89 points, or 0.4%, to 5,056.06 as other major indexes also rose. The record of 5,048.62 was set March 10, 2000, when wild speculation in Internet and other tech-related stocks, along with now-discredited practices of Wall Street’s sales machine, pushed stock prices far beyond even reasonable valuations.”[2])

Meanwhile, William FitzGerald points to parallels between the current situation in the oil industry, with relatively low prices, and the financial crisis that began in 2007.[3] And it is awfully weird how producers can simply carry on at prices that had dropped by more than half.[4]

Paul Krugman seems to think “we’re turning into an economy that ‘needs’ bubbles to achieve anything like full employment.”[5] By that standard, even though headline unemployment is down to 5.5 percent, we have a long ways to go because that figure excludes millions of people who’ve dropped out of the labor market or are underemployed or who need full-time work but have had to settle for part-time.[6]

There’s other cause for suspicion. As housing somewhat recovered from the financial crisis, some very eye-catching stories very strongly suggested a new bubble.[7] While real estate agents should probably be viewed somewhat like used car salespeople, I haven’t heard much on that front in a year and a half. (Update and correction, April 23, 2015: I had forgotten about San Francisco real estate. The housing situation in this city cannot really be separated out from the tech boom, where “Silicon Valley companies such as Google, Facebook, Apple and Yahoo are making it easier for their workers to live in the city by providing free shuttles equipped with Wi-Fi to cover the 30- to 40-mile commutes to their offices.”[8] Relatively luxurious and costly private buses supplement the city’s overloaded Municipal Railway, with routes serving wealthier neighborhoods,[9] already high rents are skyrocketing,[10] the city’s racial make-up is forecast to become more white,[11] and tensions between long-time residents and quite well-off high tech workers have predictably been rising.[12] All and all, it is a far cry from the roughly $300 per month rent we paid for a flat on Laurel Hill while I was in junior high and high school, with a view of Lone Mountain College (not yet a part of University of San Francisco), Mount Sutro (We watched Sutro Tower being built), and Twin Peaks.)

Similar concerns have been raised about student loan debt which seems to pit the immovable object of loans that can’t be discharged through bankruptcy against the irresistible force of former students faced with huge debts that some fear may retard their spending.[13] Sure the economy may indeed not grow as fast, but given the twin ideologies of austerity[14] and of education seen as a private rather than a social good, relief and sanity seem nowhere in sight. What happens here will be a slow accumulation of individual tragedies—a simmering pot that perhaps eventually boils dry—rather than a massive calamity affecting millions all at once—the pot boiling over. As Jordan Weissman put it,

For the most part, it’s not helpful to think of student lending, circa 2013, in terms of bubbles at all. Rather, as Chadwick Matlin has put it at Reuters, it’s more of an anvil weighing on a large but discrete group of very unfortunate borrowers. In all but the most rare circumstances, it’s impossible for former students to discharge their bad debts in bankruptcy. That means the government is mostly protected from defaults. So are the banks, to a degree.

Young adults, however, are on the hook for debts they can’t handle, but which they’ll likely continue to take on so long as college costs stay high. There won’t be a moment where the market goes “pop.” But there’s still a crisis that needs to be addressed.[15]

Then there are the more general worries, such as the occasional ones I’ve seen over the rise of the stock and bond markets.[16] And I’ve even seen a claim that used car loans are the new subprime.[17]

So bubbles, bubbles, bubbles. Everywhere one looks there are bubbles. And as skeptical as I am of this economy and of this economic system, I don’t see any one of them as compelling.

There’s a larger picture, however. Think of each of these bubbles or potential bubbles as a destabilizing positive feedback in the capitalist system under a neoliberal ideology. Not one of them needs to be compelling. It becomes the combined effect of them all that results in system change. In that sense, short of climate change, we might be up against the biggest bubble of them all.

  1. [1]Joe Kukura, “The next tech bubble is about to burst,” Daily Dot, April 19, 2015,
  2. [2]Dean Starkman, “Nasdaq closes at record high of 5,056, beating dot-com mark,” Los Angeles, April 23, 2015,
  3. [3]William FitzGerald, “How Crisis In The Energy Sector Could Spark A Repeat Of The Subprime Bust,” Forbes, April 22, 2015,
  4. [4]Becky Bohrer, “Alaska faces tough decisions, drastic budget cuts, dipping into savings as oil prices plunge,” Minneapolis Star-Tribune, January 18, 2015,; Michael Corkery and Peter Eavis, “As Oil Prices Fall, Banks Serving the Energy Industry Brace for a Jolt,” New York Times, January 11, 2015,; Lynn Doan and Mario Parker, “Biggest Oil-Rig Drop Since 2009 Spells Tough Year Ahead,” Bloomberg, January 6, 2015,; Economist, “Oil at $50,” January 7, 2015,; Economist, “Uneasy lies the red,” January 14, 2015,; Clifford Krauss, “Oil Prices Fall to Lowest Since 2009,” New York Times, January 12, 2015,; Clifford Krauss and Peter Eavis, “Oil’s Fall Continues Into 2015, and Stock Markets Shudder,” New York Times, January 5, 2015,; Steve LeVine, “Energy Shocks,” Quartz, February 17, 2015,; Angus McDowall, “King says Saudi Arabia to deal with weak oil challenge with ‘firm will’,” Reuters, January 6, 2015,; RTT News, “Crude Oil Plummets Below $49 On Euro Zone Worries, Supply Glut,” January 6, 2015,; RTT News, “Crude Oil Plummets To End Below $47 As Supplies Surge,” January 22, 2015,; RTT News, “Crude Oil Ends Below $46 On Strong Dollar, Oversupply Concerns,” January 23, 2015,; RTT News, “Stocks Pull Back Sharply Amid Steep Drop In Oil Prices,” January 28, 2015,; RTT News, “Crude Oil Plummets Below $45 After Huge Inventory Buildup,” January 28, 2015,; RTT News, “Crude Oil Plummets Near 9% As Inventories Surge,” February 4, 2015,; RTT News, “Crude Oil Plunges 4.7% To End Below $45 A Barrel,” March 13, 2015,; Gaurav Sharma, “North Sea Braces for $40 Oil as Market Rout Continues,” Forbes, January 16, 2015,
  5. [5]Paul Krugman, “Airbrushing Austerity,” New York Times, April 22, 2015,
  6. [6]Matt O’Brien, “Economists have discovered how bad the economy really is,” Washington Post, April 21, 2015,
  7. [7]Susan Berfield, “A Phoenix Housing Boom Forms, in Hint of U.S. Recovery,” Bloomberg, February 21, 2013,; David Dayen, “The housing ‘recovery’ is a total sham,” Salon, July 31, 2013,; Alejandro Lazo, “Motivated home buyers skip the bidding wars,” Los Angeles Times, June 22, 2013,,0,4463414.story; Jennifer Medina and Katharine Q. Seelye, “As Home Sales Heat Up Again, Buyers Must Resort to Cold Cash,” New York Times, June 8, 2013,; Nathaniel Popper, “Behind the Rise in House Prices, Wall Street Buyers,” New York Times, June 3, 2013,; Catherine Rampell, “Boom, Bust, Flip,” New York Times, October 1, 2013,; Catherine Rampell, “Buy Low, Sell High,” New York Times, October 2, 2013,; Robert J. Shiller, “Housing Market Is Heating Up, if Not Yet Bubbling,” New York Times, September 28, 2013,; Daniel Wagner, “After the meltdown: Is another mortgage bubble coming?” Salon, September 11, 2013,
  8. [8]Tracy Elsen, “Color-Coding San Francisco’s Totally Bonkers Rental Market,” Curbed, August 14, 2014,
  9. [9]Susie Cagle, “Privatized busing comes to San Francisco,” Al Jazeera, April 19, 2015,
  10. [10]Josh Boak and Michael Liedtke, “San Fran housing rent up a sizzling 14.8 pct. in 12 months,” Associated Press, April 22, 2015,
  11. [11]Tanvi Misra, “A Startling Map of How Much Whiter San Francisco Will Be in 2040,” CityLab, April 22, 2015,
  12. [12]Projjal K. Dutta, “The Dark Side of Tech Buses for Cities,” UBM’s Future Cities, February 25, 2014,; Erica Goode and Claire Cain Miller, “Backlash by the Bay: Tech Riches Alter a City,” New York Times, November 24, 2013,; Andrew Gumbel, “San Francisco’s guerrilla protest at Google buses swells into revolt,” Raw Story, January 25, 2014,; Claire Cain Miller and Erica Goode, “Making San Francisco Accessible to More Than the Tech Elite,” New York Times, November 26, 2013,; Will Oremus, “Eviction protesters block Google bus in San Francisco: Fake video of Google employee goes viral,” Slate, December 9, 2013,; Norimitsu Orishi, “New San Francisco Tech Boom Brings Jobs but Also Worries,” New York Times, June 4, 2012,; David Streitfeld, “Activists Accuse Tech Community of Throwing San Francisco Under the Bus,” New York Times, January 21, 2014,; David Streitfeld, “Google Pays for the Ride,” New York Times, February 27, 2014,
  13. [13]Tim Donovan, “Profiting off your student debt misery?: America’s little-discussed conflict-of-interest,” Salon, November 27, 2013,; Natasha Lennard, “The student debt bubble isn’t bursting,” Salon, September 6, 2013,; Alec Liu, “The Student Loan Bubble Looks Awfully Like the Housing Crisis, Top Bankers Say,” Vice, May 13, 2013,; Jason Richwine, “What ‘Profits’? Rolling Stone’s Matt Taibbi Misunderstands Student Loans,” National Review, August 23, 2013,; Joseph E. Stiglitz, “Student Debt and the Crushing of the American Dream,” New York Times, May 12, 2013,; Matt Taibbi, “Ripping Off Young America: The College-Loan Scandal,” Rolling Stone, August 15, 2013,; Jordan Weissman, “No, the Student Loan Crisis Is Not a Bubble,” Altantic, September 6, 2013,
  14. [14]Mark Blyth, Austerity: The History of a Dangerous Idea (Oxford, UK: Oxford University, 2013).
  15. [15]Jordan Weissman, “No, the Student Loan Crisis Is Not a Bubble,” Altantic, September 6, 2013,
  16. [16]Ha-Joon Chang, “This is no recovery, this is a bubble – and it will burst,” Guardian, February 24, 2014,; Paul Krugman, “Bernanke, Blower of Bubbles?” New York Times, May 9, 2013,
  17. [17]David Dayen, “America’s next big rip-off: Cars are the next subprime crisis!” Salon, November 27, 2013,

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