I was bored and watched the video since I'm interested in the topic.
We're not to the bubble yet. I agree it's out there on the distant horizon, but how far? For this government stimulus bubble to burst, we need economic growth which precipitates increased interest rates by the Federal Reserve. We haven't seen this yet.
You see, as the economy begins to grow and interest rates slowly rise, this is when denial will begin to happen. The prognosticators of demise today will be seen as total idiots, where as now, they are seen as enlightened individuals. Bubbles work on contrarian philosophy. When a 100 voices around you say "It's all up from here!" and you're the lone voice in the room saying "It's going to fall apart," and they laugh at you, that's when the bubble is ready to burst. If 50 of the hundred voices agree with you, it's way too early to discuss a bubble.
I agree with what is said, it's just they're way way too early; they're so early they'll be forgotten when disaster is upon us and the danger is greatest.
Here's what I think might happen....
We don't have a growing economy and interests rates are not raised significantly. We have a dead fish economy that slowly rots away, without a huge bubble or a massive disaster that pops it. Imagine a decade of above 8% unemployment with less than 2% interest rates, where nothing jump-starts the economy. To solve it, we might do a couple things... We could adopt the old mentality and use more stimulus, but at this point I think they would realize debt is the problem so a different solution is necessary. The second solution would be to reduce debt levels of consumers and the government; such a process could be slow and painful without a crisis.
Look at what happened to Japan after their bubble collapsed in 1991. Their stock market never fully recovered even to this day. Their economy never really recovered either, they ended up with "zombie banks" that didn't lend money and just existed because their collapse would have caused a depression. Sound familiar?
As a result Japan in the past has been known for always having lower interest rates.
Without a solid recovery in the USA, I don't believe the world economy will fully recover because much of the world economy is based on US debt-spending. If the world economy does recover, it will be led out of the hole by nations like China. Foreign increase in interest rates could result in increased interest rates here, but if our economy is still weak, I see no reason the Federal Reserve would raise interest rates very much.
If inflation is a bit high as a result, I think the Federal Reserve would realize that, "a little inflation to avoid a government debt crisis is preferable." This is referred to as "Stagflation". Our debt will disappear with such inflation; the bubble will have its gas let out, possibly.
Here's the 100 trillion dollar question... if the US dollar experiences higher than normal inflation, will China begin selling the dollar, causing it to collapse? If China does this, they'll likely have a crisis of their own as they lose trillions of dollars in devalued currency. See, if dollars flooded the market, they'd likely suffer a devastating 30 to 50% loss in the value of their assets in a short period of time. Loss due to inflation would be more manageable at something like 10% to 15% a year minus the yield on the bonds they hold. Which would you prefer, because that's what will drive their decision ultimately.
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If my scenario happens, I'll be chuckling the whole time because China will be getting what they deserve for playing hardball with us by using their currency to subsidize their domestic production. This practice has caused us to lose countless jobs here.
Well, if we hit an inflationary period, China's dollar holdings will evaporate in their hands, and it will be a restraining factor on their future economic growth while expanding the potential of our future economic growth. Though, it will totally suck for the 5 or so years we have high inflation, but it could be a blessing in disguise so long as interest rates don't rise to the point of causing a debt crisis.
