It now becomes apparent that this situation is explained by the consequences of misdirected production finally making themselves visible. The emerging profits squeeze, rising layoffs and the capital utilisation 'conundrum' suggest that 1999 will be the economy's crunch year. Another danger signal, and one greatly commented on, is the stock market boom. Excess credit is much like excess water, it must find an outlet. Every credit boom I know of eventually triggered a stock market boom that inevitably resulted in a speculative frenzy, sometimes causing stock prices to reach stratospheric levels, much like Wall Street today.
Shares are titles to capital goods.
It follows, according to economic theory, that the discounted anticipated earnings of those shares determine the value of the companies that issued them. This makes the South Sea Bubble look positively tame in comparison. Now all economic activity is speculative. It cannot be otherwise in an uncertain world. But there is speculation and speculation.