Analysis and reflections on historical bubbles

Firstly, while asset bubbles vary in size and form, one thing is abundantly clear: for an asset bubble to burst , central banks would need to not only tighten monetary policy, but also raise short-term interest rates to the point where they would invert the yield curve. This historical regularity is too powerful and compelling to be ignored. Secondly, the rapid expansion of monetary aggregates brought about by massive quantitative easing by central banks is a new and different point compared to the historical financial environment. There is no doubt that this is positive for asset prices, as the rapidly expanding monetary stock enhances the ability of economies to tolerate higher asset prices. Similarly, if CPI inflation starts to accelerate, it will contract the liquidity available in asset markets. This is why rising inflation is almost always positive for asset markets. Thirdly, stock market valuations are a tricky issue because equity values are affected by multiple forces. Nomin...

The inflation and bursting of bubble economies is a recurring phenomenon in the world's economic history. Although the causes, timing and size of bubble economies and their impact on society vary, they all end tragically, and in some cases with great economic and financial disaster. The literature on bubbles is extensive. However, there is no systematic response to how all previous bubbles burst. Today's markets, with their growing optimism, make it particularly important to discuss this topic in depth. From the 17th to the 19th century, there were three famous bubbles: the Dutch Tulip Bubble of 1635 to 1637 , the BritishSouth Sea Bubble of 1720 and the Great Railway Madness of 1844 to 1846 . In the case of these bubble economies, interest rate volatility was a key catalyst for the asset market boom and subsequent collapse. Source:  Gareth Campbell: "The railway mania: Not so great expectations?" Asset bubbles have emerged more frequently in recent decades, wi...

A bubble economy is an economic phenomenon in which the excessive growth of virtual capital and related transactions are increasingly divorced from the development of physical capital and the growth of the industrial sector, property prices are soaring, and speculative transactions are highly active.  Source:  CNBC International A bubble is a state where the prices of assets, such as stocks and real estate, deviate from their values.  Source:  Will Kenton - Investopedia Bubbles emerge during economic transition because the inertia of the high-growth period of thinking drives all kinds of subjects to allocate a large amount of capital to the field of short-term value-added assets. A moderate productive bubble triggers a concentration of resources in new technologies, industries, and business models, which is conducive to promoting innovation. A speculative bubble , caused purely by speculation in the trading market, sends the wrong price signals to factors such as ...