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.S.assetsnatural gas pipelines was about to go under.Was it really83c03.qxp 8/8/06 1:39 PM Page 84America s Bubble Economyso hard to see that Enron was actually a house of cardsheaded for a fall?How is it possible that so many Enron accountants(the most esteemed in the nation), lawyers (the mostesteemed in Houston), investment bankers (the mostesteemed in the world), stockholders, employees, andmanagers all simultaneously suffered group blindness in theface of the facts: Enron s basic business practices were adisaster waiting to happen, and anyone with their eyesopen could have easily seen it.The truth is, everyone involved was smart enough tosee it coming, they just didn t want to.Management mayhave been guilty of misleading people, but that doesn tchange the fact that everyone desperately wanted to bemisled.Ironically, Enron s motto was,  Ask Why. Apparently,no one ever did.And the same is true of America s bubbleeconomy.Like the Enron folks who had so much to gain bykeeping their eyes closed, America seems to be sufferingsimultaneous bubble blindness.Before Enron collapsed, no one asked why their stockwas up 50 percent in just one year and then up almost 100percent the next.No one asked why Enron stock jumped up30 percent in just a few days, following a relatively minorannouncement that they would enter a new broadbandmarket.No, nobody asked.They all just kept quiet and keptmaking money.Despite the plain facts, they all desperatelywanted to believe the good times would never end.Just like the rest of us.Along the same line of thinking regarding the U.S.economy, is it really that hard to see that $8 trillion ingovernment debt that can t possibly be paid back might notbe the best thing for the country? Is it really that hard to seethe fallacy in homes appreciating 80 percent while incomes84c03.qxp 8/8/06 1:39 PM Page 85Bubblequakeare up only 2 percent? Is it really that hard to see that thestock market is overvalued when it s up more that 1,000percent in 20 years without an equal rise in real earnings?And why isn t anyone mentioning the disturbing fact thatChina and Japan have had to buy almost $2 trillion of ourU.S.dollars just to prop up its value? Is it really that difficultto see that all this, coupled with a nearly $1 trillion tradedeficit, might be setting us up for one hell of a fall?The Two Great Motivators, Fear and Greed,Will Accelerate the FallMost bubbles pop because investors fear loss of money.Inthis case, the demise of the bubbles will be driven by bothfear and greed fear of losing money on their U.S.invest-ments and the ability to make huge amounts of money inother investments.That is a powerful combination.It s asif investors will be pushed and pulled by two giant mag-nets.On one side, they will be pushed away from their U.S.assets because of falling asset values that limit or eliminateprofits.Investors don t like that.On the other side,investors will be strongly pulled toward the irresistibleprospect of making huge profits elsewhere, primarily ineuros and gold.Investors very much like that.Both these magnets the fear of loss and the desirefor gain will push or pull investors to unload their U.S.investments.The  Fear Factor : The Fear of Losing MoneyThe fear of losing money will be a major motivator forinvestors to sell their U.S.assets.The more people sell, the85c03.qxp 8/8/06 1:39 PM Page 86America s Bubble Economylower asset values will fall and the more people will wantto sell, further depressing prices.Two things will help push this fear along.The first andmost important is the growing dissatisfaction with theAmerican government and economy.Foreigners invest inthe United States, not only because the returns have been sogood, but also because they draw comfort from the feelingthat the United States is well managed and rock solid.Onceforeigners begin to perceive the United States as poorly ledor less than bulletproof, psychology turns more negative.This is where intangible factors, like the war in Iraq, couldhave an impact.Unfavorable views of the Iraq war eitherbecause we got in it in the first place or because it s going onmuch longer than we anticipated is already tarnishing theU.S.image abroad.With less confidence in the UnitedStates and its government, foreigners become less interestedin investing.Other factors, such as a slowdown in economicgrowth and declining real incomes may also undermine our rock-solid image with both foreign and domestic in-vestors.Another factor that may push things along is the fearof what the U.S.Federal Reserve may do next.In particu-lar investors may become more anxious in the absenceof Alan Greenspan.Whatever people might say aboutGreenspan s tenure as Federal Reserve Chairman, fewwould deny his ability to produce a certain amount ofconfidence among investors, both foreign and domestic.Maintaining this confidence becomes more and more crit-ical as people begin seeing warning signs of problems withthe dollar, the housing market, and the stock market.Greenspan had a knack for putting investors at ease, evenin the face of obvious dangers.He didn t always ignore86c03.qxp 8/8/06 1:39 PM Page 87Bubblequakedangers, but he tended to downplay them in a way thatmade investors feel more comfortable.By doing so, heeither purposely or not so purposely, had a significant rolein allowing our various bubbles to grow so large.In Greenspan s absence, the bubbles will be harder tomaintain.It s not that the new Federal Reserve Chairman,Ben Bernanke, will be particularly bad.So far, he s gotten adecent reception from investors; and in terms of move-ments in the overnight Fed Funds Rate, Bernanke maymake very similar decisions to what Greenspan wouldhave done.However, when problems appear, few peopleare better than Greenspan at maintaining positive psy-chology.As our multiple bubbles collide, Greenspan sabsence may hasten their collapse.In addition to these two  fear factors, there s an evenmore compelling reason why foreign investors will eventu-ally want to dump dollars.87Source: cartoonstock.comc03 [ Pobierz całość w formacie PDF ]