The global economy is poised to enter a new phase of robust, dependable growth. Technological and economic historian Carlota Perez calls it a “golden age.” Such ages occur roughly every 60 years, and they last for a decade or more, part of a long cycle of technological change and financial activity.
This doesn’t mean that the world’s political and economic problems will go away. But whereas the details of long cycles vary, the overall pattern of progress remains the same: An economy spends 30 years in what Perez calls “installation,” using financial capital (largely from investors) to put in place new technologies. Ultimately, overinvestment and excessive speculation lead to a financial crisis, after which installation gives way to “deployment”: a time of gradually increasing prosperity and income from improved goods and services.
I maintain that in the present environment there is no such thing as a return to self-sustaining growth. There will be no return to the supposedly normal conditions, which were in fact, from a historical point of view, highly abnormal, of the 1990s and 2000s.
What one needs is to set a strategic direction for renewal of economic activity. We need to create the institutions that will support that direction.
Financial bubbles are a way of life now. They can upend your industry, send your portfolio into spasms and leave you with whiplash. And then, once you’ve recovered, the next one will hit.
Or so you might think, as a veteran of two gut-wrenching market declines and a housing bubble over the last decade.
There’s plenty of reason to expect more surprises, given the number of hedge funds moving large amounts of money quickly around the world and the big banks making their own trades. (…)
If you want to better insulate yourself from bubbles — however often they may inflate — there are plenty of things you can do.