Bubbles in History
A bubble may be defined loosely as a sharp rise in price of an asset or a range of assets in a continuous process, with the initial rise generating expectations of further rises and attracting new buyers – generally speculators interested in profits from trading in the asset rather than its use or earning capacity. The rise is usually followed by a reversal of expectations and a sharp decline in price often resulting in financial crisis. A boom is a more extended and gentler rise in prices, production, and profits than a bubble and may be followed by crisis, sometimes taking the form of a crash (or panic) or alternatively by a gentle subsidence of the boom without crisis.
KeywordsBank lending Booms Bubbles German inflation (1923) Hedge finance Kindleberger, C. P. Law, J. Mississippi bubble Ponzi finance Railway mania Rational expectations South Sea bubble Speculative finance Tulipmania
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