Mark J. Perry Had These 3 Things To Say About Bubbles And Their Consequences | Exploring Markets

Mark J. Perry Had These 3 Things To Say About Bubbles And Their Consequences

Mark J. Perry wrote down the following 3 points about bubbles in financial markets. Each point is very interesting and you should jot them down somewhere so you don't forget next time someone tells you a bubble is upon us:
1.) "Bubbles are to free-market capitalism as hurricanes are to weather: regular, natural, and unavoidable. They have happened since the dawn of economic history, and they’ll keep happening for as long as humans walk the Earth, no matter how we try to stop them. We can’t legislate away the business cycle, just as we can’t eliminate the self-interest that makes the whole capitalist system work. We would do ourselves a favor if we stopped pretending we can." 
2.) "Bubbles and their aftermaths aren't all bad: the tech and Internet bubble, for example, helped fund the development of a global medium that will eventually be as central to society as electricity. Likewise, the latest bust will almost certainly lead to a smaller, poorer financial industry, meaning that many talented workers will go instead into other careers—that’s probably a healthy rebalancing for the economy as a whole. The current bust will also lead to at least some regulatory improvements that endure; the carnage of 1933, for example, gave rise to many of our securities laws and to the SEC, without which this bust would have been worse." 
3.) "We who have had the misfortune of learning firsthand from this experience—and in a bust this big, that group includes just about everyone—can take pains to make sure that we, personally, never make similar mistakes again. Specifically, we can save more, spend less, diversify our investments, and avoid buying things we can’t afford. Most of all, a few decades down the road, we can raise an eyebrow when our children explain that we really should get in on the new new new thing because, yes, it’s different this time."

Source here: http://mjperry.blogspot.com/2008/12/why-bubbles-are-perfectly-rational.html