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Do Big-Money Acquisitions Mean We're In a Tech Bubble?
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'?"
That is not the right question. Of course it is a bubble. The question is, "Where in the bubble are we?" Just starting, or about to pop?
We've been in a bubble economy-wide since the crash of 2007. It's (more or less) intentional, fueled by artificially low interest rates and the Fed pouring money into the banking system. That money has no place to go, so it goes into whatever's trendy at the moment - whether there's real value there or not.
Everyone (again - more or less) agrees that the economy needed the stimulus, but a better approach would have been to pump the money into the economy via smartly targeted (or even non so smartly targeted) direct government spending. Funded, if possible, by new revenue streams themselves defined to have little effect on employment and other economic activity. But we don't have either a functioning market economy or a functioning democracy capable of managing the economy through the political system. So we go from bubble to bubble - or crash to crash, depending on how you view it.
Posted from my Android phone. Oh, I can change this? There, that's better...
Keynesian's would run surpluses during good times.
Yes, which is what Keynesian economics advocates. Also, these surpluses should be used to pay down debt that was accumulated during the last economic downturn or accumulated to make a rainy-day fund to shore up the economy during the next economic downturn or (and conservatives will be shocked by this) taxes be reduced so that there is no longer a surplus.
However, parent also seems to confuse what is recommended by Keynesian economists (who broadly believe these recommendations) and the actions of the politicians, who often ignore actual economists (of any stripe), which seems to be some odd tactic to discredit Keynesians simply because (just like most normal people) politicians don't listen to them.
That is all.