

How the Tech Boom Terminated California's Economy  - spudlyo
http://www.fastcompany.com/article/how-tech-boom-terminated-californias-economy
The real estate crash is really just the second leg of the dot.com crash--the failure of housing to absorb the tremendous cash surplus generated by the irrational exuberance of Internet investors.
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larryfreeman
From my view, the argument behind the article is not very strong. His best
data point is that he talked to an entrepreneur who didn't know what to do
with $20 million.

The argument that technology start ups don't create value seems to be
disproven by the current valuations of Google, Facebook, Twitter, etc.

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mnemonicsloth
The Economist calls California the ungovernable state. They have a much more
realistic appraisal of what's going on here:

<http://www.economist.com/displayStory.cfm?story_id=13649050>

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10ren
Sewn seeds are unlikely to grow <http://www.merriam-
webster.com/dictionary/sown>

I rarely practice pedantry, but this usage's (to me) almost-plausible
unreality twisted my mind. I suspect it signals the quality of aspects of the
article that are less susceptible to verification.

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jswinghammer
I don't see how any sector of the economy is responsible for the inevitable
bust that follows an inflationary boom. We had massive inflation over the last
8 years and when that inflation started to be curbed the bust that followed is
no one's fault but the people who started the inflation in the first place.
California's budget woes are the result of spending too much during a boom not
realizing that we were all living in a fantasy world.

The article doesn't address the fact that intellectual property is a form of
wealth that is perfectly fine to invest in. Yes there was a lot of errors made
during the boom but that's true of all of the booms including our most recent
stock and housing bubbles.

I'm still long on the technology industry as a whole. I think there's a lot of
good work still to come and I'm looking forward to seeing it. I just hope that
the next time inflation comes our way we identify it sooner and act
accordingly.

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anamax
> We had massive inflation over the last 8 years

<http://www.bls.gov/data/inflation_calculator.htm> disagrees.

We had a huge run-up in house-purchase prices, especially in certain markets.
Other things were roughly stable. Technology got cheaper.

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jswinghammer
Inflation is an increase in the money supply. Rising prices are a side effect
of that increase. The government has many reasons to hide and distort real
rising prices including TIPS and just generally wanting to stay in power.

Inflation was directed by the federal reserve for 8 years at a record pace.
When the fed lowers interest rates they in effect increase the money supply
through the expansion of bank credit which is the primary means by which money
is introduced into the economy.

~~~
anamax
> Inflation is an increase in the money supply.

Nope. <http://en.wikipedia.org/wiki/Inflation> "inflation is a rise in the
general level of prices of goods and services in an economy over a period of
time."

An increase in the money supply is an increase in the money supply. If the
increase matches other factors, all is generally good. If it doesn't bad
things happen.

> Rising prices are a side effect of that increase.

Rising prices are inflation. They happen when the money supply increases
faster than the relevant function of wealth and "velocity".

> When the fed lowers interest rates they in effect increase the money supply
> through the expansion of bank credit which is the primary means by which
> money is introduced into the economy.

"the primary means"? The fed discount rate isn't that effective at affecting
the money supply; it has a marginal effect. If it was an effective means,
they'd have used it. Instead, they're printing money.

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helveticaman
I disagree, but voted it up for the interesting counterpoint.

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sutro
Contrarian, concise, convincing. Wonderful writing.

