That’s the thesis of Karl Smith, who makes a very convincing case for a slightly different idea. He says that bubbles are driven by too much savings sloshing around the world:

Large inflows of savings create – necessarily I would argue – bubbles…Usually when people buy a product the price goes up. It then becomes harder for other folks to buy the same product and so the number of buyers stabilizes.

Yet, with capital goes the opposite can happen…the cost of a capital good is the cost of carry, and that includes, in large part, how easy it is to unload the capital in a pinch. The more buyers a capital good has the easier it is to unload. This can actually make capital goods more affordable as demand increases and the market price rises.

This relates to the US budget deficit because as the world gets older and richer, especially outside the traditionally stable market democracies, people will save a lot more. All that savings will be looking for a safe investment, and there’s none safer than US debt. But if we were to pay off the national debt then there would be an enormous excess of savings with nowhere to go, and…

The result is a world with an ever increasing propensity towards bubbles. Indeed, if things simply continue along their current path and the US decides to cut the deficit then we should expect bubbles far greater than the ones we have experienced in the past.

We can see already that the next bubble will probably have something to do with either alternative energy, smartphones or social networking. Indeed, its possible that it could contain all three.

The obvious quibble with this is that people managed to inflate a titanic bubble back in the 2000s, when George Bush was still running up huge deficits. Also, it doesn’t seem possible that the world could get older at an ever-increasing pace. Wouldn’t deaths have to equal things out after a generation or so?

But more broadly, it seems like the problem could be equally stated as there being just too much income concentration. We used to have economic growth driven by wage-led consumption, where recessions were caused by the Fed tamping down inflation. Now what little growth we have is driven by asset bubbles, and recession are caused by enormous debt overhangs. If we could get that money out distributed more broadly, then the bubble tendency would be correspondingly diminished.

The politics of that seem utterly impossible, what with the one percenters capturing 93 percent of income gains in 2010, but the way this has happened in the past is that increasing income concentration leads to ever-larger bubbles which leads to a huge crisis and eventually systemic collapse. The Great Depression paved the way for a lot of stuff that severely restricted income concentration in the US, so it’s not impossible to imagine something similar happening to China and India.

It could be that this aging-wealthier trend is just a force of nature, and we’re doomed forever to quick spurts of insane growth in between crushing depressions. But it seems worth trying to avoid.

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Follow Ryan on Twitter @ryanlcooper. Ryan Cooper is a national correspondent at The Week. His work has appeared in The Washington Post, The New Republic, and The Nation.