Thursday, May 29, 2008

Innovation and the Economy

In a recent post at Seeking Alpha, Michael Steinberg contemplates Alan Greenspan’s theory of the results of innovation with the economy.

According to Greenspan, we’re seeing the innovative equivalent of a “bubble” due to the financial innovation that took place in the 1990s. The housing boom was due to the new options to buy homes.

However, there’s no reason to pop this one bubble, because the economy could turn out stronger in the future. He alludes this to the growing of the internet. If we hadn’t of had the .com bubble burst in the 1990s, the internet wouldn’t have grown at the speed it had, and would not be as large as it is today. Is our current state of affairs just one small part in the continuing innovation of our economy?

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