Japan, for example, experienced a huge surge in real estate and stock prices in the late 1980’s. The most recent example is the Great Recession after the market crash in 2008. The same opposite situation can also arise. Fools are always causing bad things to happen, and they contribute to economic bubbles too. Bubbles happen everywhere. However, depending on the economic sector or industry, bubbles can also have some positive effects. An economic bubble is high trade and market values of commodities, goods, and products, the intrinsic prices of which are very low. 7 Examples of Economic Problems posted by John Spacey , May 30, 2016 updated on March 17, 2021 Economic problems are turbulent periods on the way to economic and national development that can last for years, decades or longer. 2005 Housing Bubble . But there are causes beyond pure greed. These bubbles are invariably followed by a crash when investors, who are no longer willing to pay through the nose, panic and sell en masse, resulting in a sudden collapse in prices and tears all round. The Mississippi Bubble (1719-1720) The Mississippi Bubble -- which derives its name from the French Mississippi Company -- grew out of France's dire economic situation in the early 18th century. In the United States alone we have seen two in the past twenty years: The dot-com bubble in the late nineties and the mid-2000s real estate craze that has resulted in today’s downtrodden economy. Tulip mania (1637) an economic bubble that bursted, hurting the economy of the Dutch Republic; The General Crisis (1640) Arguably the largest worldwide crisis in history [opinion] 18th century. Economic history has therefore recently contributed to three areas of contemporary, policy-relevant debates surrounding bubbles. The first area is the central question of whether bubbles represent examples of market irrationality. The asset bubble that occurred in real estate in 2005 was fueled by credit default swaps that were used to insure derivatives such as mortgage-backed securities and collateralized debt obligations (CDOs). Well, greed as we saw in all the examples of financial bubbles. A bubble burst can have a devastating effect on the economy, even on a global scale. The historical evidence on this point is somewhat mixed. In the long-term, the bursting of a bubble may lead to new technology, new infrastructure, and improvements in the overall economy. Bubble Causes. Summary of Article “Economic Bubbles” Economic bubble is a term used to define the trade of products and assets at highly inflated prices that are considerably beyond the assets intrinsic value. Great Tobacco Depression (1703) (United States) - South Sea Bubble (1720) (UK) History is littered with examples of economic bubbles during which assets like commodities, land, stocks rapidly inflate in price well above their intrinsic value. Hedge fund managers created a huge demand for these supposedly risk-free securities, which in turn boosted demand for the mortgages that backed them. The fools are those from the greater fools theory. Real estate bubbles in United States were responsible for a great deal of reduction in financial activities. However, Hyman Minsky viewed the bursting of economic bubbles as more of a feature of the market rather than a failure of it. Examples of financial and asset bubbles Economic bubbles are formed as a result of speculation by the investors who feel very optimistic about the future increase in the asset’s price. 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