How to reduce the economic bubble? What is a bubble economy

We will reduce redundant infrastructure construction, marketize interest rates, abolish the super-national treatment of foreign investment, and expand domestic demand.

Breaking monopolies and so on.

The bubble economy refers to a false boom characterized by the unconventional nature of assets (real estate), i.e., in a continuous process that the market far exceeds the value it actually represents. Put simply, a bubble economy refers to the excessive growth of virtual capital.

There are certain advantages and disadvantages of the bubble economy, on the one hand, it is conducive to the concentration of capital to promote active competition and prosperous economy; On the other hand, there are speculative factors in the bubble economy, which can easily lead to excessive fluctuations in assets, resulting in market chaos, social turmoil and other undesirable harms.

The three stages of the bubble economy

The bubble economy can be divided into three stages, namely the bubble formation stage, the bubble expansion stage, and the bubble bursting stage.

The root causes of the bubble economy:

Fictitious capital is capital that exists in the form of valuable ** (including **, bonds, real estate mortgages) and can bring a certain income flow to the holders.

Actual capital is capital in the form of physical forms in the form of factors of production and commodities.

There will be no bubbles in the movement of productive capital and commodity capital, because the movement of productive capital and commodity capital is mediated by the flow of physical form, and the corresponding flow of money is in the opposite direction and the flow is basically equal. Therefore, it is believed that the bubble economy is born from the movement of virtual capital, which is also the root of the bubble economy that always originated in the financial sector.

In addition, as a real estate land, its special composition makes land assets become an asset with virtual capital attributes, and at the same time, the financial industry and the real estate industry penetrate and integrate with each other, so that every economic bubble will inevitably be accompanied by the bursting of the real estate bubble.

The "bubble economy" refers to a false boom in which assets (real estate) are characterized by unconventional conditions, the immediate result of which is unrealistically high earnings expectations and a general speculative frenzy.

To put it simply, in order to form a bubble, there must be a period of irrational prosperity in the market, which supports the market to reach a very dangerous height. Therefore, the formation of a bubble requires a series of boosting factors, like the wind to push the bubble higher and higher, this mechanism is discussed by Professor Shearer, a Nobel laureate economist in "Irrational Exuberance", which he calls a feedback loop. "Feedback loops" are also known as self-actualization, herd effects, vicious circles, etc.

The existence of this phenomenon in the financial market has been discussed for a long time, but because it involves the transmission of social psychology, it is not a natural scientific phenomenon, and it is more difficult to accurately describe and define it.

The bubble economy is a macroeconomic state in which the value of assets exceeds that of the real economy and is prone to losing the ability to develop sustainably. Speculation often supports the bubble economy, and lacks the support of the real economy, so the assets of the bubble economy are as easy to burst as bubbles, so it is called the "bubble economy" in economics.

Because market expectations support speculation, or because people think that these are bubbles that have grown to a certain extent, resulting in assets **fast**, this is what economics calls bubble bursting.

The bubble economy can be divided into three stages, namely the bubble formation stage, the expansion stage, and the bursting stage.

In general, capital flows should reflect the state of operation of the real capital and industrial sectors. Once finance exists, financial speculation is bound to exist and begin to create bubbles.

The bubble economy usually refers to the large amount of capital in the continuous process of the cherry blossoms, so that its market far exceeds its actual representative value, forming a false prosperity and unsustainable economic state.