In the February 2008 issue of Harper's, Janszen issued an economic warning in an article called "The Next Bubble...Priming the markets for tomorrow's big crash." A strong headline, and one worthy of this compelling article. Janszen says that we didn't learn anything from the dot.com bomb, and — instead of taking "decades of soul-searching" to reconcile the hurt —we were already well on our way to inflating the housing bubble.
"Spurred by the actions of the Federal Reserve, financed by exotic credit derivatives and debt securitization, an already massive real estate sales-and-marketing program expanded to include the desperate issuance of mortgages to the poor and feckless, compounding their troubles and ours," he writes.
"That the Internet and housing hyperinflations (bubbles) transpired within a period of 10 years, each creating trillions of dollars in fake wealth, is, I believe, only the beginning."
Could Janszen be right that these two economic debacles are the foundation for further economic euphoria? Even though everyone knew that the dot.com craze and the housing free-ride were too good to be true, consumers lined up like crack addicts to get their hit. The pushers? Economists. Brokers. Bankers. The media. The government. Con artists.
Anyway, in his article, Janszen teases the reader a tad with a couple potential next bubbles, but points out neither of them will quite materialize. The most obvious is health care. With aging baby boomers doing everything they can to fight getting older, there's no doubt that they will live longer, and as a result, will need more health care. As good as that sounds for investors wanting to jump on board this economic engine, Janszen says there is no enabling government legislation to help fuel it. Same is true of the pharmaceutical industry, he says. Although I think both of these bubble candidates are viable, let's stay on task.
Janszen says the real candidate for the next bubble is alternative energy because of clear government indicators, which for our industry, revolves mostly around the Energy Policy of 2005. Its provisions guaranteeing loans for alternative energy businesses already have started to have an effect on the aftermarket. Suddenly, ethanol captured our fancy as an alternative fuel that would reduce our reliance on foreign oil and is clean burning. Not that it is entirely fading away, but the realization that it takes more energy to make ethanol than the energy it produces certainly made it more likely that ethanol plants will replace abandoned barns as Mail Pouch billboards.
Instead of ethanol or solar power, Janszen thinks a nuclear-power push is imminent. He says advanced nuclear-reactor designs that generate electricity and hydrogen are at hand. This indicates the existing infrastructure that generates electricity will become more dominant. For me, that clearly positions fully-functional and plug-in hybrids as our industry's future.
But that is an aside to our bigger discussion: How our industry responds to alternative energy over the next couple years will inevitably determine how much we contribute to the next bubble. We all, to some degree, have felt the effects of the last two bubbles. I think most would agree that a bubble economy is not a truly healthy economy, but as Janszen points out, we may have reached the point where we need the next bubble to sustain our economy. Frankly, we're caught in a Catch-22. That is, and always will be, a tenuous course at best.
Larry Silvey, a 25-year veteran of the automotive aftermarket, is editor-in-chief of Aftermarket Business and Editorial Director for the Advanstar Automotive Group, which consists of Aftermarket Business, Motor Age, ABRN and Styling and Performance.