Bubble babble

April 1, 2011, 4:10 PM UTC

FORTUNE — I’m calling a top to the pundit bubble. All week, spurred by Color’s gaudy valuation, the tech and economic punditry have continued their months-long monologue about whether or not we’re in a tech bubble. Back and forth they went, inflating nothing but their own self-importance as they jostled to be the one on the right side of history. (Call it the Roubini Effect.)

The only way to keep track is to grab a napkin and keep a running bubble pro/con list. Put it right next to that million-dollar startup idea you wrote down during lunch.

Bubble! Boom!
There were more tech deals done in 2010 than any year since 2000. The IPO markets are still relatively quiet. So the only people who are getting hurt are the rich private investors who have access to companies the rest of us don’t. And a bubble isn’t a bubble unless the peasants have the opportunity to get screwed too.
Startup spoofs are emerging, with the bubble as the comic subtext. See two classics of the genre, both devoted to the $41 million funding round for Color, an app few have actually figured out how to use:

  1. A sample slide presentation of why Color deserved the money.
  2. A fearless, incisive review of Color’s inanity on the App Store.
People are still laughing at the idea that a startup needs $500,000 to help sell bottled air. Nervous laughter. But laughter nonetheless.
The number of tech jobs in San Francisco is nearing its 2000 high. In a less dichotomous economy, we’d cheer any good employment news. But in a potential bubble, low unemployment becomes a warning sign—a green shoot flashing red. The Price/Earnings ratio of already-existing stocks are all under control. And perhaps more importantly, people who don’t usually care about stocks don’t yet feel obligated to know what that last sentence means.
Employee perks—and the trend stories documenting them—are back. Most notably, free beer is now flowing in Yelp’s office. And developers at the company wrote an iPad program to keep track of how much everyone is drinking. Consumers are actually paying for stuff this time. Facebook, Twitter, Zynga, Groupon, and LinkedIn all have real, honest-to-God revenue. It’s still small, but it’s more than you can fit inside a sock puppet.
There is a startup whose business is to make “Coming Soon!” pages for other startups. Said startup hasn’t attracted major venture capital funding. Yet.
Zynga hired people to go to Wall Street, dress up like British commoners, and stand next to sheep to promote its new Facebook game. The five most-prominent 2010 Internet companies are valued as highly as the 24 largest were in 1999. But all of them actually make money!
Eric Schmidt, who is good at not being wrong, says that yes, we’re in a bubble. Jason Calacanis, who since 2005 has been good at not being right, says that yes, we’re in a bubble.

So let’s just call it even. Because far more interesting than the question of whether we’re in a bubble is the question of why we’re so consumed with the question of whether we’re in a bubble. This impulse, this insuppressible urge to take a definitive stance on what is almost certainly an indefinite situation—why?

Because we’re still exorcising our ghosts. But not the ghosts of 2000. The far fresher ones of 2008.

When the tech bubble collapsed in 2000, $5 trillion evaporated from the NASDAQ, vanishing even quicker than it appeared. Tell-all books were published—Dot.con, Dot.Bomb, which was which? PBS did a major retrospective documentary called, yes, Dot.con. (Funding in part provided by Earthlink (ELNK), whose stock was on its way to a 75% decline.) And ethics violations soon gave rise to a new crop of political avengers capitalizing on our anger. (The biggest, Eliot Spitzer, would later fall as he watched his foil, Henry Blodget, rise.)

But as the Boom! column showed in the above chart, this is a different situation than in 2000. Because most of these companies are still private, the superrich is in control of the economy for the rest of us. They’re the ones with access to tech incubators, business plans, balance sheets, and the secondary markets. The 2000 crash also left behind, among other things, a ton of fiber optic cables that we still rely on for broadband today. It’s not entirely clear what, say, Zynga leaves behind if this bubble — again, if there’s a bubble — pops. All that farmland can’t be repurposed.

This combination—rich people, empty growth, and a lack of transparency—should sound familiar. Like, 2008 financial crisis familiar. (With all the obvious caveats of web startups being a far smaller industry than housing and finance, etc. etc. etc.)

And now, just two and a half years later, we’re faced yet again with the prospect of not having the money we thought we had. We’re still recovering from the last shock, how can we already be willing to trust capitalism again? Unemployment is still high, the housing sector is still depressed, and any world uprising/tsunami/debt crisis threatens to wash away the small steps we’ve made toward stability. It would be irresponsible to blindly believe the supposed good news coming out of Silicon Valley! It must be a trap. It has to be a trap. These people say they can make our lives easier, if only we give them a little bit of money. We’ve heard this before. Theoretically, America the hopeless romantic can only get burned so many times before she joins a convent. But in reality, it just doesn’t seem like she’ll ever trade one habit for another.

–This is the first column in Fortune’s new look at the startup economy. Every week you’ll get a new dispatch from the bubble that may or may not exist. Send your froth to Chadwick.Matlin@gmail.com or come talk shop on Twitter.

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