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Friday, June 20, 2003

Bubbles or Steam?-I'm not sure what economy Krugman's watching, but it's not from this universe
The big rise in the stock market is definitely telling us something. Bulls think it says the economy is about to take off. But I think it's a sign that America is still blowing bubbles — that a three-year bear market and the biggest corporate scandals in history haven't cured investors of irrational exuberance yet. Or, to put it another way: it's hard to find any real news to justify the market's leap. Instead, investors seem to be buying stocks because they are rising — which is pretty much the definition of a bubble.
Well, let's try an end to the war with Iraq, a lack of terrorism in the US, a drop in old prices from this winter, inflation so low it's verging on becoming deflation and a, ahem, tax cut, and you've got a lot of reasons for investors to be bullish. They may not be reasons for "progressives" to be bullish, for this news may not translate down to Joe Shoprat as well as it does to the average stockholder, but it doesn't mean investors are stupid. They can see higher corporate profits coming from a growing economy. What Krugman sees as bubbles, I see as steam coming from an economy finding its footing. It's an economy that may not have all the goverment spending or income equality that Krugman may like , but it is one that will be growing and working more in the best interest of the American public than a more European big-government plan.

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