A Bubble Deflated…
does not re-inflate. At least according to Charles Hugh Smith:
It is simply a truism that bubbles never reflate, ever. Tulip bulb valuations did not rise to stratospheric heights after the Tulip Craze popped, and the Nasdaq dot-com bubble did not reinflate, either, for the very good reason that bubbles are never based on rational valuations–they are based on the psychological state of mania which cannot be reinstated once lost.
Thus, Mr. Smith says, don’t expect housing prices to recover. Ever. That bubble has burst, and he gives five reasons we shouldn’t expect the housing bubble to reinflate. They are:
- Bubbles historically do not re-inflate
- If we have inflation, it will eliminate any gains
- If we have deflation, housing becomes a capital trap that loses money
- The bubble was the result of fraudulent lending. We won’t see that return
- Demographics - we have enough housing stock to satisfy the needs of our projected population growth
You can read the full post here.
[via Clusterstock]
