Bubbles in our future? Certainly

The derivative fiasco Yet we have witnessed two bubbles within a decade: the dot-com bubble at the turn of the century and then the American housing price bubble, which had global economic consequences because of the international marketing of derivatives secured on overvalued assets, notably the su...

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Bibliographic Details
Published in:The OECD observer 2018-09, p.1-4
Main Author: Johnston, Donald
Format: Article
Language:English
Subjects:
Banking
credit crisis, bubble, credit bubble, debt
Derivatives
Earnings
Economics
Financial instruments
Global economy
Gold
Home ownership
Housing
Human nature
Investments
Investors
Land use
Marketing
Mortgages
Real estate
Securities markets
Stock exchanges
Stock market crashes
Subprime lending
Tsunamis
Turn of the century
Values
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Summary:The derivative fiasco Yet we have witnessed two bubbles within a decade: the dot-com bubble at the turn of the century and then the American housing price bubble, which had global economic consequences because of the international marketing of derivatives secured on overvalued assets, notably the subprime mortgages of American homeowners. Japanese banks suffered in the same way in the 1990s after they loaned massive amounts of capital secured on highly inflated real estate values. There are strong analogies between the dot-com bubble of recent years and the South Sea bubble, and for that matter the stock market crash of 1929 where in two months the market lost 40% of its value and by the end of the crash three years later was down nearly 90% from its 1929 high. Because greed is a basic component of human nature I believe there will always be irrational bubbles chased by investors trying to catch them as they inflate, knowing full well that collapse may lie ahead but hoping it comes after they have made a profitable and safe retreat by benefiting from the greed of the greater fool.
ISSN:0029-7054
1561-5529
DOI:10.1787/6a52577e-en