Blowing Bubbles

Recently I read a history of capitalism called "The Relentless Revolution," by historian Joyce Appleby. Ms Appleby gives a nice concise list of the financial crises we have endured since the beginning of Reaganomics and the dismantling of the post-Depression regulations:

Before the world recession of 2008-2009, the market’s stumbles had grown ever more frequent and painful, starting with the crash of 1987, followed by the junk bond crisis of the late 1980s, the 1989 sinking of the savings and loan industry, the Japanese depression, the Asian fiscal crisis of 1997, the Long-Term Capital Management near-default of 1998, the bursting of the dot-com bubble of 2000, the Enron and WorldCom debacle of 2001, climaxing with the rippling losses from the mortgage-based securities debacle in 2008.

There were no financial crises in the United States between 1940 and 1987. There were recessions of course, but crises had been eliminated by financial industry regulations. Once those were removed with the ascendency of conservative free-market fundamentalist economic theories, financial crises began up again.

And it looks like we are already working on blowing up the next bubble. The Goldman Sachs investment in FaceBook was evidence of that, according to William Cohan in the New York Times:

With Goldman’s investment in Facebook, we have a front-row seat to the process by which Wall Street creates and inflates financial bubbles. This bout of hysteria involves not only Facebook but other Internet companies including Twitter, the gaming site Zynga, the social buying site Groupon and LinkedIn, another social networking site. The valuation of these companies has soared in the past two years, leading some to worry that the American people bailed out Wall Street so that we could relive the Internet Bubble of 1999.

In the article he goes on the list the many ways that Goldman Sachs will profit from this deal, as "investor, salesman, money manager, I.P.O. underwriter," while adding almost no value and creating nothing.