[In regards to another industry] I was just talking to a friend about booms, busts, bubbles, etc.
In a giant boom/bubble, resources get misallocated. The bigger the boom the bigger the misallocation.
For example, producers ramp up production facilities, ramp up employment, invest in certain types of infrastructure, all of which are designed for the spending patterns of the boom part of the cycle. This applies to real estate, luxury clothing, restaurants, 124-inch projection TV's Hummers, or the laying of fiber optic cable in 1999 (just ask Corning Glass!)
Giant booms produce a particularly strong warping of production and consumption patterns.
[Obviously we recognize that such patterns are always in flux, and adjustments to these patterns play both a useful role in capitalism and also reflect other fundamentals]
In this case, too many dollars went into luxury consumption in this last cycle. and with with real estate. It could never have been sustained indefinitely at that level. And i suspect that some sectors of the economy will not see a return to 2006-07 levels of spending until 2012, 2015 or who knows when. As government forces/funds/policies are becoming more important, they will play a growing role in shaping the patterns i'm talking about.
What's worse now is we're being hit with below normal economics. Spending in certain producer and consumer sectors is below what one would think it would be- due to the financial shockwave and the debt overhang. This could put a lot of businesses out of business during the adjustment period.
In a giant boom/bubble, resources get misallocated. The bigger the boom the bigger the misallocation.
For example, producers ramp up production facilities, ramp up employment, invest in certain types of infrastructure, all of which are designed for the spending patterns of the boom part of the cycle. This applies to real estate, luxury clothing, restaurants, 124-inch projection TV's Hummers, or the laying of fiber optic cable in 1999 (just ask Corning Glass!)
Giant booms produce a particularly strong warping of production and consumption patterns.
[Obviously we recognize that such patterns are always in flux, and adjustments to these patterns play both a useful role in capitalism and also reflect other fundamentals]
In this case, too many dollars went into luxury consumption in this last cycle. and with with real estate. It could never have been sustained indefinitely at that level. And i suspect that some sectors of the economy will not see a return to 2006-07 levels of spending until 2012, 2015 or who knows when. As government forces/funds/policies are becoming more important, they will play a growing role in shaping the patterns i'm talking about.
What's worse now is we're being hit with below normal economics. Spending in certain producer and consumer sectors is below what one would think it would be- due to the financial shockwave and the debt overhang. This could put a lot of businesses out of business during the adjustment period.
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