Of late, Americans have a knack for engaging in spectacular economic fiascoes. First there was the dot com bubble, then the real estate bubble. Our penchant for get rich schemes is amazing. My mind has wandered to a very simple rule of thumb: if everyone is getting rich in exactly the same way, the majority of people involved are going to get hurt.
So what is next? I don’t think the Chinese product recall really qualifies. Yes, it is somewhat self-inflicted. And yes, the steady movement of consumer product and ingredient manufacturing to China was largely fueled by efforts to make as much money as possible. But not at a level that involved the average American. Sure we benefited from the high quality, $6 t-shirts we bought for our kids, but most of us aren’t getting rich from Chinese manufacturing.
I think the next bubble might just be the huge rush in America toward bio fuels. I’m all for adding more renewable energy into our energy diet, but a lot of money is being poured into corn and soybean farming. So much so that I wonder if the market really needs it all, particularly if you consider all the crop subsidies that are in place. And we don’t know what the secondary impact of the investment will be. If speculators lose money there will be a ripple effect, but the average person may not be impacted that much unless the shift to crops for energy impacts other parts of the economy.
I have a friend who recently moved to Wisconsin to start an organic farm. She is going to grow and sell organic vegetables, but her main crop will be hay. Why hay? She says so many farmers have switched to farming crops for fuel that it has created a hay shortage. It sounded like an awfully broad claim to me. This summer we drove 12 hours from St. Louis to Michigan, and I have to say the number of crop fields in Northern Illinois and Indiana with bio diesel signs along the highway was astounding. It is a bubble candidate for sure, but maybe not to the extent of the technology and real estate bubbles.
What else could be the next bubble? If you have an idea, let me know, I’ll look into it because I am dying to know.