Gennaro Zezza — The Next Bubble?

Is the U.S. economy heading towards another bubble? Since last week, the number of commentators on this subject has been growing, from Robert Shiller to Nouriel Roubini (on housing markets)...

Summing up, our findings suggest that U.S. non-financial corporations are in a healthy state – as measured by their net profits – but that this will not necessarily imply stronger U.S. growth and job creation. On the contrary, the data are coherent with a further increase in the concentration of income leading to financial speculation, in the U.S. as well as in foreign financial markets.

Restoring jobs and prosperity in the U.S. does not seem to be what U.S. corporations are working towards, and yes, the soaring stock market may change course very quickly, if “financial markets” make this decision.

Restoring sustainable growth in the U.S. (and elsewhere) requires a reversal of the trend in income distribution, since, as Stockhammer reminds us, “rising inequality has increased the propensity to speculate as richer households tend to hold riskier financial assets than other groups,” and “higher inequality has led to higher household debt as working class families have tried to keep up with social consumption norms despite stagnating or falling real wages” – a fact we already investigated a few years ago.

Multiplier Effect

The Next Bubble?
Gennaro Zezza | Associate Professor in Economics at the Department of Economics of the University of Cassino, Italy, and a Research Scholar at the Levy Institute of Economics