The world experienced its first economic bubble when the Dutch went bonkers for tulips in the 1630s. See omnystudio.com/listener for privacy information.
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Hey, and welcome to the short stuff. I'm Josh and there's Chuck and Jerry sitting in for Dave and this is short stuff about tulip mania.
That's right. Tulip mania was perhaps the first financial bubble to happen and then burst. And we should probably talk a little bit about what an economic bubble is, don't you think?
Yeah. It's where the price of a good or an asset or something like that, let's just say item. Sure. Goes sky high, way, way, way beyond any reasonable value that it should have. And it's because of exuberant trading. And the more exuberant the trading is, the more people get sucked in by it. And they want to make some money, too.
So more people start investing and the prices keep going higher and higher and higher. That's the first part of the bubble. There's another less happy side of the bubble, too.
That's right. Because as anyone who's ever been to a bubble rave or played bubbles with your kids or just adult friends who enjoy bubbling... That bubble is going to burst. They all will eventually. And that's what happens with an economic bubble too. The price will drop usually pretty quickly. And a lot of people start selling off very quickly.
And those who get out early enough can usually avoid it. But every single time someone is going to be left holding that asset that is all of a sudden not worth much of anything. And a lot of times people have invested their entire life savings in this stuff. A lot of times they bought this stuff on credit. And all of a sudden, this thing isn't worth that much money.
And they're in real, real financial trouble.
Yeah, it's a bad scene.
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