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Is the bubble bursting?

By  Aug 16, 2007

Topics: Programming, C/C++

Is the bubble bursting? I can't answer that with certainty but every day it seems clearer that what experts first considered a "correction" is now looking more like a global collapse. The second question: are the Web 2.0 bubble and the subprime bubble related? Yes, they are. In fact, the so-called "subprime bubble" is a misleading term. It's definitely a bubble but it's not restricted to subprime mortgages. It's a much wider crisis.

The cause of this crisis is low interest rates that were kept far too low for far too long throughout Europe, Asia and of course North America. These rates enabled people to get credit easily, even when the prospects of returning these loans were pretty meager in the first place.  This euphoric state of affairs wasn't confined to real estate because many used their mortgaged houses as securities for getting additional loans that funded further real estate adventures. Some of the real estate firms did nothing but buy land, wait a few months and then resell it to the next sucker, who would in turn try to resell it to the next sucker at an even higher price. If that sounds like MLM, it's because that's what it really is! However, analysts didn't care to read the writing on the wall, or they simply pretended that they didn't. Why spoil the shindig?

When money is pouring almost freely, various ephemeral and overhyped initiatives bloom, lulling innocent people into believing that there really is a new business model that defies the well-known rules of economy. Web 2.0 is an exemplary case. When stupid venture capital stops flowing into Web 2.0 nonsense (that's going to happen sooner than many people believe), the Web 2.0 bubble will burst.

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