Dynamite Economy (1) -- What is a Bubble

1. What is a Bubble

Today, investors, advisors, leaders hold caution in their hearts even painting rosy pictures to others.
Every one of them is on their toe and thinks it is a bubble, recalling the Japanese experience in late 1980s.

What is a bubble?

Bubble Economy of Japan was due to the over confidence in their own economic prowess. The phenomenal boom was engineered by innovating new household electrics and electronics. Every Japanese was in euphoria, buying up a few movie industries, real estates like Rockefeller Center, Brazilian Coffee farms, and countless others. The world was large enough to absorb these neu-riche without causing much inflation.

When Japanese’s innovation slowed down, market saturated. This wealth-generating locomotive simmered off, economy bubble burst, dreams shattered. Tokyo Stock Exchange Indices were shaved by factors, and never return till today. Soon this will the second decades Japanese stayed at the valley.

This was a Japan-centric boom. This affected only political, economic situation in Japan. The impact was neither deep nor far-reaching. Wealth generated was relatively small. Once the wealth generator slower down, dreams gone. It was a bubble, merely a bubble. This is what a bubble is.

Even we look at the Great Depression, Dow Jones Industrial Average was chopped by more than half, after the crash, Oct 29, 1929. It led up to Second World War.

From history, we can see what will happen, when an economy ran out of steam, and the effervescence sizzled off.

There is not much excess wealth to support the market, swinging the market up and down. So the dreams gone, the bubble burst.