Jesse Colombo, an economic forecaster who identified a housing and credit bubble in the US prior to the 2008 crash, says a number of new bubbles in markets around the world are set to burst.
He said: “I am very concerned that the coming recession will not be a typical, garden-variety recession because an incredible number of new bubbles have formed in the past decade thanks to global central banks’ stimulative monetary policies. These bubbles are forming in global debt, China, Hong Kong, Singapore, emerging markets, Canada, Australia, New Zealand, European real estate, the art market, U.S. stocks, U.S. household wealth, corporate debt, leveraged loans, U.S. student loans, U.S. auto loans, tech startups, shale energy, global skyscraper construction, U.S. commercial real estate, the U.S. restaurant industry, U.S. healthcare, and U.S. housing once again. I believe that these bubbles are going to burst violently in the coming recession, which will make the recession much stronger than usual – possibly even worse than ’08.”
My take: the problem with bubbles is that it is very difficult to predict when they will burst. Much depends on the actions of the Fed. If the Fed raises interest rates (or tapers quantitative easing, the printing of money to decrease the value of your hard earned dollars), government borrowing becomes more expensive and more difficult and politicians get mad. If the Fed does not reduce quantitative easing, inflation becomes high as the value of dollars continue to go down against everything else as more dollars are printed.