Do Big-Money Acquisitions Mean We're In a Tech Bubble? 266
Nerval's Lobster writes "When a major IT company pays a reported $30 million—roughly 90 percent of it in cash—for an iOS app with no monetization strategy and a million downloads since launch, is that a sign that the tech industry as a whole is riding a massive, overinflated bubble? Yahoo isn't alone, by a long shot: over the past couple years, a few apps have been snatched up for enormous sums—think Facebook's $1 billion acquisition of Instagram in 2012, or Google buying Sparrow for a reported $25 million. Nor has the money train stopped there: in a pattern that recalls the late-90s market frothiness for anyone over the age of 28, a handful of tech companies have either launched much-hyped IPOs or witnessed their share price skyrocket into the stratosphere. But does all this IPO activity and app-acquiring actually mean 'bubble'?"
Comment removed (Score:5, Informative)
Re:Bubble (Score:4, Informative)
What are ascribing to Keynes is exactly the opposite of what Keynes advocated.
The stock crash that heralded the coming of the The Great Depression was created by the policies you criticize -- policies lauded by the Republicans and Wall Street at the time, as a matter of fact.
Keynes observed that when there is significant underutilized productive capacity, there was risk of a deflationary spiral that further disrupts production. Government spending under these circumstances can have a strong positive effect for little dollar cost or risk to long term economic health. It did not take a genius to recognize that when people were starving and shoeless, shoe factories were laying people off, and farmland was left fallow about being repossessed by the bank, a little stimulus can create a lot of useful growth "out of nowhere", without violating any law of thermodynamics. All it took is a little common sense.
The question is whether we have significant underutilized productive capacity in the American economy today. I do not have a strong opinion on that point one way or another.
What I do believe is that a little inflation, by means of monetary hocus pocus or whatever, is probably a good thing when the economy is weak and we were recovery from an asset bubble in housing. That relieves pressure on the housing market, by bringing some homes out from being "underwater". While not glamorous that was probably the right policy to pursue over the last several years. Whether it is worth continuing those policies for much longer is less clear, because the fall off in construction has brought home prices and rental prices roughly in line with the long term historical norms.