Gold, Another Economic Bubble?

September 19, 2009

Photo by Eduard Traq

Photo by Eduard Traq

No doubt you have heard about the debate over whether we are in the midst of another economic bubble. Economists and financial experts say there are ten problem areas for us, and we need to pay attention to them.

Economic bubbles are not a new phenomenon. They have been occurring throughout history and mankind never seems to learn the lesson associated with them. It seems people are prone to looking for a “pot of gold” at the end of the rainbow only to find out it was not what they thought. This was the case in the economic collapse of France caused by John Law in the eighteenth century.

The ten problem areas are: the Chinese economy, the “Green” bubble, the Gold bubble, the Federal Reserve bubble, the Trash (junk) bond bubble, the Education bubble, the Subprime bubble, the Life Insurance securitization bubble, the Commercial Real Estate bubble and the Emerging Markets bubble.

It is interesting that the issue of increased gold prices is now an issue with the Chinese and Russian governments. The price of gold often increases when paper money is devalued by printing paper money.

It will be interesting to see how the Obama administration handles this challenge. We are fortunate that we have access to research and technology which could help us out of this problem before it gets out of control.