The Corner

Pop Pop, Fizz Fizz

Mike Malone, the business and tech writer, has a fascinating column here, at ABC news, about the nature of the economic problem we face this time. Writing from Silicon Valley, he argues that is is not unlike last time — when the internet stock bubble burst. And not really so different than 1987. His column, The Mentos Economy, makes the point that for a long time after the Great Depression we understood these bubbles and subsequent collapses as very intermittent, all-encompassing historic events, unlikely to be repeated in lifetime. In our current economy smaller bubbles may burst more frequently, with quite serious, but less catastrophic impact. Basically we pick up and go on. He uses the analogy of dropping a Mento into a bottle of Coke, which apparently produces a huge soda explosion; that is, a small event which causes a disproportionate explosion. He does a much better job with the analogy than I can replicate here.

This is more big picture, political economy than the heavily statistical, somewhat jargony, finance and economics we are all grappling with as we try to understand what’s going on. Sometimes a good metaphor will provide better understanding of a phenomenon than the numbers and jargon. This is it.