And 1893, and a bunch of other times. But that might also be called the "business cycle". This nice tame business cycle that we've come to take for granted is created by the Fed; the sans-Fed business cycle was incredibly vicious.
(What is hard to know is how much laundered money props up real estate in London, NYC, Miami, etc., and if we crack down on laundering, whether it will pop the bubble. Adam Davidson and Seth Hettena have written well on how we got here and why it will be difficult to unroll.)
The business cycle of boom and bust is characteristic of capitalism as a system, and if anything, the elastic monetary policy that the Federal Reserve allows has softened the blows.
In a nutshell, it is now believed by several researchers to have been a very narrow phenomenon with minimal impact to the national economy. Per Wikipedia
"While Mackay's account held that a wide array of society was involved in the tulip trade, Goldgar's study of archived contracts found that even at its peak the trade in tulips was conducted almost exclusively by merchants and skilled craftsmen who were wealthy, but not members of the nobility.[44] Any economic fallout from the bubble was very limited."
https://en.wikipedia.org/wiki/Tulip_mania#Modern_views
Taken at face value, this suggests that the tulip "bubble" was dramatically different from either the dotcom or the mortgage bubble, which had wide ranging participation and damage. One could argue that the latter two would have been impossible without the Fed.
But bubbles continued. I wonder if one can make a case that pre-FED bubbles were notably smaller than post-FED bubbles, factoring in the fact that the nature of modern economies may magnify bubbles. In other words, if there is a continuous upward slope to the size of bubbles from the 1600's up to now, then it would appear FED made no significant difference. But if there is a spike or jump when FED formed, it could mean they magnify them.
Some factors for US's continued growth: healthy demographics - due to immigration, low corporate tax rate, interest rate rising and dollar strength - attracting capital inflow, biggest economy in the world, biggest consumer market in the world, one of the most innovative for its size, balanced economy (used to be dominated by manufacturing, but now it is pretty spread out and consistent), good environment for rich to immigrate to, growing reshoring of manufacturing, leader in technologies, etc.
Instead of comparing US to the yesteryears, let's compare US to other countries in the world today and see why money is going to keep flowing into US for a long time.
Japan: seems to be on an upswing, the recent news of bring in 500,000 immigrants will help with the economy. Unfortunately, it still suffers from demographic decline, innovation staleness, 1.0% anemic gdp growth, competition from cheaper Asian countries for manufacturing, etc. Its paternalistic culture doesn't help to introduce women into the workforce and boost/diversify its economy. Still, a good place to live for many, and high standards of living. but not for investments.
Xi Jing Ping: he is the dictator, therefore he is the country and the economy. Sadly, history has proven that a society cannot escape middle-income trap until it has transformed to a culture that promotes openness and innovation, something that a dictatorship has never shown to do. Therefore the country is dedicated to stealing IP from other countries and companies for a long time. If one looks at other dictatorships in the current era, they always exhibit faster economic growth than their democracy counterparts. However, once the easy growth is used up, the dictatorships are stuck in a decline. As evidenced by the country's 350%+ GDP to debt, 3 trillion of its 6 trillion wealth has fled to overseas, and 50% of rich wanting to leave. Also, evidenced by strict capital control, draconian rule of law, censorship, housing bubble bursting, fake GDP numbers claimed by many of its provinces, etc. The current government will try to hold on for another 10-15 years, stunting the economy. Xi Jing Ping will die, then the grab for power will throw the economy into chaos.
EU: several of its nation members are suffering EU withdraw symptoms. Greece would like to leave but its economy is too small to matter. Italy however, is another story. With the 3rd biggest economy in EU, and the recent elected populist leaders, Italy will try to pile on the debt to address its anemic economy and migrants issue. EU unfortunately won't be able to do much; threaten Italy with debt reduction (currently 120% of gdp), and Italy will leave EU. Do nothing, and Italy will bring down EU's fiscal health until EU disbands. EU doesn't seem to be viable in 5 years.
Emerging Market: current capital outflow indicates there are trouble brewing due to expatriation of dollar back into US. From Turkey to Argentina to Indonesia, the emerging markets are going to struggle paying back their dollar-denominated debts with the rising interest rates and stronger dollars. Flashback to 1998 Asian crisis.
Disclosure: I have no stocks in play.
NB: Bernanke [1] is not the fed chairman and hasn't been since 2014 when he was succeeded by Janet Yellen [2].
Jay Powell [3] is the current fed chair.
[1] https://en.m.wikipedia.org/wiki/Ben_Bernanke
All presidents are surrounded by financial experts. Also the ‘financial experts’ did a lot of mistakes and mispredictions through history, not sure if your point stands.
Having a businessman for president is arguably good, a country is not a business.
I started my working life right into the jaws of the Great Recession and try not to forget that lesson.
Yes, there is. It's driven by individual credit cycles syncing up due to the economies of scale of financial distribution. Borrowing money fundamentally means more income today and less income (than otherwise) tomorrow. That drives cycles.
Most open system that tend towards homeostasis will exhibit boom-bust feedback loops (ecosystems, metabolism, gene expression, antibiotic resistance, human economies, etc.).
I'm not sure it's either possible or desirable to fight that at a fundamental level, although I do think politically it's a very good reason to provide a strong financial safety net.
I'm not sure what you mean by capitalism, but human economies are fundamentally self regulating homeostatic systems. You can engineer around that to make them more human friendly, or just, or dampen the swings, but you can't fight their fundamental nature.
Now, I think I agree with your larger point, that without the Fed this would be much worse.
So how did markets exist at all when the Fed was created? By your logic, they would have "gone off a cliff and never come back" long before that.
> When the government stimulates the already hot market with lax taxes and high spending it’s like pouring liquid oxygen onto a flame
Even after all the stimulus so far? No diminishing returns, ever?
I’m not a communist. Probably the market the US spread through the globe from 1945-2017 was a highlight. A pretty well buffered system, but not without it’s hard lessons and squandering of the individual wealth. There are clear examples of exploitation.
The risk is that fiscal policy is pouring more fuel on the fire at the precise time when the economy typically starts slowing, further inflating asset bubbles and making the Fed's job (to avoid inflation and keep employment high) much potentially harder and making it more likely a misstep will happen.
Popping bubbles or slowing their formation is inherently a tricky proposition (just look at the run-up in stocks from early 2017 until now); move too aggressively and you risk sparking a liquidity crisis and plunging your economy directly into recession; move too slowly and you end up with an even larger bubble later on to deal with.
This is tricky in normal times, but doing so while the other wing of government is actively stimulating the economy makes it much harder to gauge the impact of monetary policy and withdraw Fed support in a prudent and measured way.