Thanks!

Ken

Also with rising interest rates, the Fed is still increasing the money supply with no commensurate increase in savings.

Anyway – if you could supply a source for the boom starting in 1920 exactly would be fantastic (note that this doesn’t mean a price rise).

Kinda feels like your grasping at straws (I note how quickly you moved away from the Railway Mania).

Next.

The theory that “bubbles” are purely a monetary phenomenon is inconsistent with this observation.

With a stable money supply, an increase in prices of one asset class demands a decrease in prices of another. The fact that we didn’t observe that in the last decade is evidence of an increasing money supply.

Speculative bubbles can obviously get out of control with “animal spirits” but without an infinite money supply to fund the speculation, you just can’t get bubbles because the cost of borrowing would increase and other investment opportunties would be far more attractive as their prices would fall/yields would increase both on a relative and absolute basis.

The housing bubble we just went through was a combination of the increasing money supply and legislative incentives for home ownership (tax deductions, no capital gains tax, low interest on housing, Fannie/Freddie bidding up loan books and providing liquidity).

With an increased money supply, it has to go somewhere. If the legislators incentivise certain activities by not allowing the market to generate diminishin marginal returns into an asset class, then that’s where the bubble will form. Other industries latch on to the growth into that sector (eg mortgage broking, building, furnishing etc) that when it becomes evident that there was not sufficient real capital to support the growth and anciliary business, then the bust occurs and everything else that was tied into it follows.