Re:Sorry to burst your bubble
by stygiansonic on Sunday July 19, 2015 @08:55PM
(#9913492)
The definition of a recession is tied to changes across the entire economy, which GDP is usually taken to represent.
Housing constitutes only a part of GDP, so it's possible for bubbles to form in housing prices (or indeed any asset category) even though the entire economy might be in recession.
Furthermore, the definition of a bubble is pretty tenuous. Often, a bubble is only known in hindsight. Furthermore, during a recession, certain asset prices (safe haven assets like perhaps gold, government bonds, the strength of the USD) may increase substantially as people seek safety and cash flows into these assets. Does this constitute a "bubble" in these assets?
Housing constitutes only a part of GDP, so it's possible for bubbles to form in housing prices (or indeed any asset category) even though the entire economy might be in recession.
Furthermore, the definition of a bubble is pretty tenuous. Often, a bubble is only known in hindsight. Furthermore, during a recession, certain asset prices (safe haven assets like perhaps gold, government bonds, the strength of the USD) may increase substantially as people seek safety and cash flows into these assets. Does this constitute a "bubble" in these assets?