Glamor Economics

Chapter 166

Chapter 21 Section 2 Lost Decade and Disappeared Wealth - Bubble Economy

According to British media reports, in February 2008, prices in Zimbabwe soared, and the inflation rate reached an astonishing 2%. The paper value of the local currency was already lower than the paper value.People are often seen on the street struggling to buy daily necessities with a stack of banknotes.At first glance, an outsider would think that it is full of lucky lottery winners or billionaires, but unfortunately, this large pile of currency is worth less than the paper that makes it.At this time, 100500 million Zimbabwean dollars are only equivalent to 2500 US dollar.

This is the hyperinflation that is at hand, and history seems to be repeating itself.The economy can activate a society, but it can also destroy a society.

In the late 20s, Japan's stock and land markets were frantic.In the four years from the end of 80 to the end of 1985, the total market value of Japanese stocks tripled.Land prices also doubled one after another. By 1989, the total market value of land in Japan was five times that of the United States, while the land area of ​​the United States was 4 times that of Japan.The myth of getting rich overnight is constantly being staged in the two markets. Envious people are constantly pouring into the market, and many companies have no intention of doing business, and have started to speculate in stocks and land. The whole society is crazy about it.

Disaster and happiness are so close.While people were still intoxicated, since 1990, stock prices and land prices have plummeted like a free fall. Many people's wealth has become a passing cloud, and tens of thousands of enterprises have quickly closed down.The collapse of the two markets brought hundreds of billions of dollars of bad debts. From January to November 1995 alone, 1 banks and non-bank financial institutions went bankrupt, and a violent run broke out that year.The extreme market prosperity suddenly collapsed, and people vividly called it the "bubble economy".

In the 20s, the Japanese economy was completely struggling. Many Japanese lamented that it was a "lost decade".

People's needs are endless. In the economy and society, our property accumulates rapidly and obtains countless happiness.The Chinese often say that "good fortune and misfortune depend on each other", and we cannot do without its benefits, and naturally we cannot refuse the destruction it brings.The economic market has always been a big dye vat full of various temptations and traps. For the sake of profit, people always start inevitable game battles, and various value conflicts intensify.Currency is the product driven by human interests, and hyperinflation is also generated from this.

In general, inflation is relatively mild, and only in special cases, it is like a scourge that swallows people's property overnight.

Moderate inflation is inflation in which prices rise slowly and predictably.Much of the world's inflation is moderate, with prices rising steadily and people feeling more confident about their currencies.

Sharp inflation means that the overall price increases at a rate of 20%, 100%, 200%, or even 1000% or 10000%.Areas where this type of inflation occurs, after prices have been tried to stabilize, have severe economic distortions and lose confidence in the national currency, using some price index or foreign currency as a measure of the value of goods.

Hyperinflation is known as the cancer of the economy. This deadly inflation rises at a rate of one million percent, or even trillion percent, destroying the market economy in a short period of time.

History is always strikingly similar.Since the first hyperinflation, human beings have created bubble miracles one after another. In 2006, my country created "orchid foam", "mahogany furniture foam" and "Puer tea foam" one after another.The price of orchids rose dozens of times within one year in 2006, and the highest price of a single orchid reached 2000 million yuan. However, as the media disclosed, the bubble burst instantly. Since 2004, the prices of Hainan huanghuali and small-leaf red sandalwood furniture have doubled, and furniture prices have increased by more than 10 times. By the second half of 2007, the bubble burst, and the "worth" of many mahogany furniture was "cut in half "...

The process of forming almost all bubbles is similar: it rises in a frenzy, everyone seems to be crazy about it, until they find out that it is absurd, they start to panic, and finally bad news comes one after another... All of these originate from profit.

[links to related words]

An economic bubble is a divergence of price from value.The price of a product fluctuates frequently in the market with changes in supply and demand, but this fluctuation always revolves around the value of the product, and generally does not deviate too much from the cost of producing the product, sometimes higher than its value, sometimes lower than Its value, in the long run, the price matches the value.

The economic bubble at this time is a reasonable economic bubble.If the price (mainly the price of assets) is inappropriately higher than its value, and suddenly rises, attracting many people's pursuit, causing the price to rise further, and a "prosperous scene" appears, we must be alert to the occurrence of a bubble economy.In the bubble economy, the economic bubble expands beyond a reasonable level and seriously deviates from its economic foundation. Price increases without economic development as the basis will evolve into a bubble economy, increasing economic risks, and harming both individuals and the country.

(End of this chapter)