One week ago, I blogged “The Height of Boom-Bust Absurdity” on my own website, a post about one of my favorite, fun topics: the cupcake craze. Or cupcake bubble. Or cupcake Idiocracy. Or Rinse & Repeat. Whatever you want to call it. For the sake of background, I will re-post it again, here, mingled with some new writing on the topic.
Cupcakes have been a favorite target of mine for a few years. Why? Because cupcakes “filled with white butter cream, topped with half vanilla cream cheese frosting mixed with chocolate chip cookie crumbs and half chocolate fudge mixed with brownie pieces, and covered with chocolate chip cookie and brownie pieces” are one of the many absurd fixations produced by the boom years that continues to titillate perpetually adolescent adults of all ages who are still experiencing their own sense of made-up prosperity even as America’s boom has become a flat-out bust. From the New York Times:
The company’s flagship product is its $3.75 cupcake — an oversize confection in flavors like apple cobbler, cookie dough and dulce de leche. There is also the “half baked,” a 590-calorie cupcake that Crumbs describes on its website as “marble cake filled with white butter cream, topped with half vanilla cream cheese frosting mixed with chocolate chip cookie crumbs and half chocolate fudge mixed with brownie pieces and covered with chocolate chip cookie and brownie pieces.”
Dumbed-down, adult America is still infatuated with cupcakes. Crumbs Bake Shop is going public not via a traditional IPO, but by doing a reverse merger with a publicly traded shell company called 57th Street General Acquisition Corp. Stimulus policies, along with the Federal Reserve’s fight to keep credit cheap and money plentiful, keeps skewing the market and distorting time preferences, making even the ridiculous seem profitable and real. Americans have developed a strange obsession with enormous, sugar-laden, pricey mounds of sweets all dressed up in toppings and flavors suitable for the most discriminating 5-year-olds. Magnolia Bakery in New York is said to have a “permanent place in the cupcake canon in part because of a cameo on Sex and the City.”
I can’t wait to short this stock. Thanks to my cupcake correspondent, Skip Oliva, for the tip on that bit of news.
Today I was surfing Bloomberg, looking for my favorite columnist Jonathan Weil. I needed a dose of his vinegar wit and energizing perspicacity. His latest column brought a smile to my face: “Cupcake Capitalism Offers Hope for New Bubble.” Jonathan claims he, along with a box of Duncan Hines and Frosted Flakes, invented the gourmet cupcake. However, in 2006 I wrote about my 1970s gourmet creations with my Easy-Bake oven. And I am older than Jonathan, so I musta been first. I almost went public but my Dad wouldn’t let me. He lacked foresight. Weil writes,
It’s easy to dismiss the cupcake craze’s arrival on Wall Street as just another indicator of a world gone mad, because it is. Yet there’s a serious point here, too. This may be one of the most hopeful signs in a long time that the economic boom-to- bust cycle may be returning to boom again.
Think about it. Would a chain of stores selling outsourced $4.50 cupcakes have stood a chance at luring stock-market investors three years ago, when the banking crisis was driving the world into a global recession? No way. Yet now the red velvet carpet is out for the likes of Crumbs Bake Shop. The opportunities for other entrepreneurs seem endless.
Weil’s message is that, once again, people are spending their way out of a busted bubble with money that they don’t have, because new bubbles will make everyone feel prosperous and happy and wash away the reality of disappearing wealth.
I started writing about the cupcake bubble over a year ago, as did Slate — do make sure you read this hilarious article on Slate. The other day, I discussed the cupcake mania with an Austro-Libertarian friend, and we both recalled the side-splitting donut bubble, a time when Krispy Kreme (the IPO darling of Wall Street) stocks went sky-high and the company reached a market capitalization of almost $3 billion. Its stock is not too gourmet nowadays, after reaching almost a buck at one point. In a recent article on WealthDaily (“The Fed Blows a Cupcake Bubble”), Adam Sharp notes:
The larger point here is about what this cupcake IPO says about the state of markets. After all, it almost certainly wouldn’t be happening without all that Fed-injected liquidity sloshing around.
A few weeks ago, as I sat with an old (Republican) friend at breakfast, we discussed a whole broad spectrum of economic issues, with my theme essentially being that Wall Street Banksterism exists to separate you from your money. We know they do this with a lot of help from their friends: the revolving door between Washington D.C. and Wall Street is awash with the members of the corporatocracy, or, as George Carlin once noted, “the people who own you.” Immediately, I went home and ordered a copy of “Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse,” and had it shipped directly to my Republican friend after he agreed to read it. I am patiently waiting for a response. And now, George Carlin.