sethnintendo said:
I watched a few documentaries on Netflix about the whole crises that happened recently. They had a guy on one of the documentaries talking about bubbles. Pretty much he said bubbles are destined because you have the early investors into any given area of the economy then people see how much money the first people are making so everyone jumps in thus causing the bubble. That is pretty much how the first bubble happened with the Dutch over tulips. Right before the tulip bubble burst you could sell a rare bulb for price of a home then when it collapsed people couldn't sell the tulip bulbs that they paid outrageous prices for anything. Same thing pretty much happened to the housing market. A bunch of people jumped in at the very end that didn't even belong there in the first place. Took out retarded mortgages because they thought the housing market can only go up. Then it crashed and they were left with more debt than the house was actually worth. Sure the Fed, banks, and other involved parties could have done something to prevent the housing bubble but no one wanted to. The main point I pulled from the documentary is that bubbles are destined to happen due to human nature. |
There is a difference between a regular bubble and a bubble fueled by the fed.
The main difference being a regular bubble isn't going to get big enough to screw the economy on a large level when you have a diversified economy.
When you've got the fed though. They more often then not offer an excess of credit, that doesn't exist.
Which leads to bubbles getting bigger... and worse bubbles not being backed by real assets.
A bubble bursting is no issue if we have the money to pay for that burst... howeever if we don't.
