We need an old-fashioned speculative bubble

The Onion Headline - “Recession Ravaged Nation Demands New Bubble to Invest In”

The market needs and wants an old fashioned speculative bubble, We are not talking about a commodity bubble which will always be viewed speculative excess. The market and policy-makers want a good old “castles in the sky” excess stock market that will give investors false hope. We are not getting one now.  The bubble may be the excessive low rates but that may be more a function of the reality that growth is going to be slow coupled with central bank manipulation. We need a bubble where prices are above fair value.

A housing bubble would be nice too. We want the perception that wealth is higher in order to fuel spending. The government has not fueled a new housing bubble and it could sure use one. The constraint on housing foreclosures is not enough. 

Some may say that college loans are a bubble, but unfortunately the loans have to paid back. The college loan issue is more based on the idea that you can avoid the bad job market with money that may not be paid back. It could fuel a bubble for the education industry, but that is another issue.

Government want false expectations of over confidence in economies in order to sustain tax revenues and fiscal excess a little longer. It is not likely to happen, but that is what everyone wants.