Could you please explain how this is similar? I believe it is actually the opposite. Given that AI technology has been in existence for 50 years, when do you anticipate this bubble bursting?
It's a new thing that is causing excitement in some corners such as the retail share markets - punters at home getting all excited, hitting the BUY button!
These bouts of market hysteria hit every 2-3 decades. It could be DNA therapy, the Internet, AI, tulips, Bitcoin - the pattern is the same every time. Excitement following a pump-n-dump campaign by a few early adopters, followed by crazy prices, followed by a crash - and then a real market in whatever it is takes over, lead by companies with real revenues and profits.
When? - give it a year and it will deflate when a recession causes all those inevitable margin calls. This will not happen to Bitcoin as most holders are long-term - they bought a few thousand in Bitcoin a few years ago and they have no intention of selling. I heard about three-quarters of all Bitcoins were bought and held over two years ago.
When was the last time this happened? Must be more than 20 years ago.
True. But house prices will have to fall to about 2.5 x ave. wage and shares will fall to somewhere around a PE of 10:1.
All that happened is that currency flooded the world's real economies and inflated asset prices. Houses in the UK and the US were sold on self-certified mortgages at 30-times wages during the 2000-2007 crazy years and share prices went bananas, all fueled by stupidly low interest rates.
US property investor George Gammon once said about two years ago that if a US punter can get a 3% 30-year fixed rate mortgage (normal in the US at the time) that mortgage will end up being worth much more than the house!
Now mortgages and other debts are back to normal interest rates but everybody is so loaded up with debt that they cannot pay index-linked borrowings. Many large UK companies are going to fail because their owners loaded them up with index-linked debt. Thames Water was just for starters!
We have the crazy situation that governments almost everywhere (not Switzerland or China) are fulfilling stupid promises to voters by borrowing new currency into existence, while simultaneously central banks are sucking currency out of the economy. Interest rates go up, governments cannot balance their books and have to go borrowing on the index-linked markets and central banks put interest rates up even further so governments cannot balance their books so they borrow fresh money into existence . . . well, you get the idea!
It's a doom-loop of stupidity!
The true answer is of course for governments and central banks to butt out of the money markets and allow assets and currencies to have their levels set by the market.