The Quiet Rise of Chinese Innovation
Over the weekend, I traded notes with Marc Faber—global investor and editor of The Gloom, Boom & Doom Report. One snippet from our chat set the tone:
At major market tops, it isn’t uncommon to see the formation of anti-bubbles alongside bubbles. And those anti-bubbles can bottom when the bubbles peak. In fact, some of the greatest buying opportunities can take place at major tops such as 2000. If you look at some of the Old Economy rejects, the cheapest many of them ever got over the past 30 years was in March 2000.
Do Technology Shocks Cause Boom-Bust Cycles?
Some economists, such as Finn Kydland and Edward C. Prescott (KP)—the 2004 Nobel Laureates in economics—believe that a major cause behind economic boom-bust cycles is technology shocks. In order to validate this view, KP employed the Solow growth model (Robert Solow, the 1987 Nobel Laureate) which, in turn, is based on the Cobb-Douglas production function of the following type:
Y=A*K(1-α)*Nα
