The third post-world war II wealth bubble
The United States has now experienced three major wealth bubbles since 1945. The first two peaked in 1999 and 2006, followed by crash and recession. By 2018, peaks were higher than ever, implying new risks that either this third bubble will pop, or returns on investments will fall, or some combination. This article provides data to support the wealth-bubble assertions, suggests that all three bubbles share characteristics and causes unique to a modern period since about 1990 and extending across asset markets, and faults arguments about market timing based on starting points with lower wealth valuations.
KeywordsWealth Bubble Recession Investment
- Congressional Budget Office. 2019. The Budget and Economic Outlook: 2019 to 2029. Washington, DC: Government Printing Office. January 28.Google Scholar
- Greenspan, Alan. 2008 and 2007. The Age of Turbulence: Adventures in a New World. London: Penguin Books.Google Scholar
- Merton, Robert C., and Zvi Bodie. 1995. Financial Infrastructure and Public Policy: A Functional Perspective. In The Global Financial System: A Functional Perspective, by Dwight B. Crane, Kenneth A. Froot, Scott P. Mason, André F. Perold, Robert C. Merton, Zvi Bodie, Erik R. Sirri, and Peter Tufano, 263–82. Boston: Harvard Business School Press.Google Scholar
- Minksy, Hyman P. 1992. The Financial Instability Hypothesis. Working Paper 74. Annandale-on-Hudson, NY: Levy Economics Institute of Bard College.Google Scholar
- Steuerle, CEugene. 1985. Taxes, Loans and Inflation: How the Nation’s Wealth Becomes Misallocated. Washington, DC: Brookings Institution Press.Google Scholar