I thought this piece over at Seeking Alpha succinctly described why the latest equities bubble may just be another false alarm, like the equities run up and run down from January to May of this year:
Although there were a number of published models out there well before the economic crisis of 2008 showing why it was inevitable, I have not seen a single model showing how this vaunted economic recovery is supposed to take place considering the present state of consumer and government debt. The crisis was caused by a credit (not real estate) bubble, which has not in any way been realistically addressed. The stimulus package and tax breaks have merely extended consumer credit further by shifting more of the new debt to the U.S. government. There seems to be no realistic plan in place for even stabilizing the accrual of this debt let alone paying it down.
To begin to pay down consumer and government debt the U.S. would have to enter another cycle of sustained economic expansion (including a huge increase in exports to overcome the trade deficit) so consumers and corporations could shoulder substantial tax increases.
Such an expansion of the U.S. economy is no longer possible given world market competition. America cannot be competitive on the world market because there are not enough Americans employed making things. Most Chinese workers, for instance, are directly engaged in production whereas only a small percentage of U.S. workers are. The vast majority of U.S. workers are employed in “services,” which mostly involves moving stuff or money around; some even, like most of the so-called financial advisers, are still simply professionally engaged in the Willy Loman vocation of hustling themselves. Arthur Miller’s character in “Death of a Salesman,” may well metaphorically represent the state of the country today.