1: a hollow globule of gas (e.g., air or carbon dioxide)
2: a speculative scheme that depends on unstable factors that the planner cannot control; "his proposal was nothing but a house of cards"; "a real estate bubble"
An economic bubble occurs when speculation in a commodity causes the price to increase, thus producing more speculation. The price of the good then reaches absurd levels and the bubble is usually followed by a sudden drop in prices, known as a crash.
Economic bubbles are generally considered to be bad things because they cause misallocation of resources into non-productive uses. In addition, the crash which follows an economic bubble can destroy a large amount of wealth and cause continuing economic malaise as was the case of the Great Depression in the 1930s and Japan in the 1990s.
October 24, 2006
Posted by blogger at 10/24/2006