Another nifty example of illusory growth, this time in Estonia.
Has anyone ever heard a reasonable explanation of why the peaks of these bubbles represented real productivity rather than just the illusory growth that’s inherent to a bubble? I’ve seen plenty of angry claims but no reasonable explanations of how that can be.
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No. Never a consistent explanation. The peaks are associated solely with a spike in asset valuation, not any real increase in national productive capacity. But we’ve been allowing productivity to fall behind for decades as policy-makers increasingly fetishized illusory financial growth, confusing it as equivalent to growth in real resources.