Bubbles

Debt bubbles are worse than asset bubbles

A Dangerous Combination: Bubbles and Debt - Bloomberg View:

"One possible answer, not suggested by Jorda, Schularick and Taylor, is that housing bubbles hit a very different slice of people than equity bubbles. Stocks tend to loom larger in the portfolio of a rich person, while a middle-income or lower-income person's wealth is often almost entirely tied up in housing. Less wealthy people could be more likely to suffer from wealth effects -- the tendency to cut consumption when personal net worth declines. "

That makes sense, Equity/stock bubbles tend to hurt the very wealthy since they, or most, have enough cash to continue life as normal. The working class doesn't really have much skin in an equity bubble so aren't affected much. The housing bubble hits everyone so the economy falls more and takes longer to recover.

or shorter... Economically hurt the wealthy and the economy hits a bump. Economically hurt the working class and the economy takes an extended dump.

This sort of flies in the face of trickle-down economics or the recent job-creator myth. I mean,.. if economically hurting the wealthy (equity bubble) doesn't hurt the economy as badly as hurting the mass of working class then,  economically helping the wealthy (via tax cuts, deregulation) shouldn't help the economy as much as helping the mass of working class?

'via Blog this'