published by Palgrave in 1926 in the English dictionary definition of a bubble economy: “Any highly speculative bad business behavior.” This seems clear enough. Thus, in 1987 edition of the Palgrave Dictionary of Economics, quoted a famous economist, the former president of the American Economic Association Kindleberger (C. Kindleberger), then re-definition of a bubble economy: “the term bubble state, random point that is one or a series of assets in a continuous process of sharply rising prices, the prices start rising prices make it even produced the expected, so he has attracted new buyers – who generally just want to make a profit through the sale, but The use of these assets and their ability to generate profits is not interested. With the expected downturn in prices often, followed by the price drop, and finally end the financial crisis. usually 'boom' time longer than the bubble state, prices, production and profits increase is relatively modest number. that they might then is to fall (or fear) in the form of crisis or prosperity faded to an end rather than a crisis. “[1]
in modern economy, people are far less than the exchange of specific goods in exchange for some symbols, such as currency, stocks, bonds, foreign exchange, futures, options contracts, checks, money orders and so on. Peter Drucker (PeterDrucker) said: “capital mobility, currency exchange, financial and other signs the economy from products, services and other real economy out of a fully independent.” “This is one of the most striking changes but the hardest to understand.” [2] Because fewer opportunities for industrial investment, return on investment is relatively low, while the rate of investment return of financial assets is relatively high. In the false lure of high rates of return under a lot of money in the economy, ineffective idle symbol does not constitute real growth. With the real economy is not directly related to the proliferation of funds of Ling Yu, the real output and departments in response to lack of funds and the gradual decline, which Jiushi often been said of the economic bubble Huahuochanye hollowed out.
2, the bubble does not mean the bubble economy.
booming economy will inevitably produce some foam. Like a mountain stream, water fast, inevitably aroused some of the bubble, but it does not thereby determine the water quality of streams what changes have taken place. Stream of bubbles and soap bubble blowing different. Stream water drinkable and soapy water is entirely impossible. Different water quality need to use different treatment methods.
bubble refers to the process of economic development imbalances often occur. Together these imbalances is the up and down the concrete representation of the economic cycle. Bubble economy, while others refer to as economic speculation, which led to the phenomenon of market price fluctuations. Because the causes of the two different damage caused by different solutions to this problem is different, so distinguishing the bubble economy and the economic bubble is not a simple word game. If you do not clear the distinction between the two, it is easy to real bubble economy and the general confusion of the economic bubble is often said, is not conducive to recognize the bubble economy, and to take corresponding countermeasures.
from the supply and demand point of view, in the normal market mechanism, price increases will inevitably lead to a drop in demand. However, when the onset of the bubble economy, on the contrary, the more prices rise, demand for the more prosperous, to buy up not to buy off. This is to determine whether the bubble economy, an important indicator identification.
bubble economy will result in volatility in some commodity prices, but the converse is not necessarily correct. Not according to some commodity price inflation fall to determine the bubble economy. Price changes caused by many reasons, the bubble economy is only one of them.
between the economic bubble and the bubble economy, the main difference is: the market mechanism will play a check and balance the economic bubble, the bubble growth rate regardless of speed, the ultimate effect of the market mechanism is always a balance, but the market mechanism of the bubble economy was completely helpless, because in the bubble economy that does not exist in equilibrium.
Third, the economic cycle and the bubble economy
in any economic system, there will be fluctuations in economic operations. In some periods, economic growth has accelerated, there prosperity, in other periods of economic recession, stagnation or recession, a cycle, which is often said that the economic cycle. Periodic fluctuations in macroeconomic and social development of the basic law.
source of cyclical fluctuations generated a social aggregate supply and aggregate demand contradiction and unity of two opposites. Government plans due to market expansion, or expansion, making the social demand and social needs of large industrial production rose led expansion. Because in the modern industry that exists between the various departments in close contact input — output, demand growth was progressively enlarged to form the multiplier. This often shows a sudden jump expansion expansion, leading to large-scale investment peak. Large-scale industrial investment, in turn caused a more dramatic expansion. The economy as if the engine starting up, like, and faster. [3]
in the process of economic development balance between supply and demand is temporary and relative; imbalance is often absolute. Economic development is not balanced state from a non-equilibrium state to another movement. In natural dialectics called “wave-forward” rule. [4] Cycle reflects both supply and demand within the system of self-regulation process of the unity of opposites. Impossible and unnecessary to eliminate fluctuations in the economic cycle. If volatility is too large or the frequency too high will cause a larger economic losses. Economic fluctuations, is not conducive to developing a long-term investment plan, a considerable part of the means of production can not be fully utilized, is not conducive to raising labor productivity and efficiency in the allocation of resources, shortage of many products 1:00, 1:00 backlog of unmarketable, causing serious waste. Volatility in economic and political stability and also affect people's lives, resulting in a series of social problems. Therefore, governments around the world regard the stability of macroeconomic policy as an important goal.
excessive investment will cause a certain degree of economic structural distortion, but eventually market forces will play a role in correcting these distortions. Thus, each over a period of time of economic adjustment will occur automatically, usually known as the business cycle. Images from the economic cycle, economic growth rate up and down, from the economic recovery to prosperity, then prosperity into recession, then declining into depression. In the period of recession and depression, within and through the economic system outside the system to adjust gradually towards recovery. This cycle is a cycle a few years. If the more serious the economic bubble up and down economic cycles of the amplitude is relatively large. Take appropriate measures to reduce the impact of the economic bubble, limiting the amplitude of the economic cycle. In general, the bubble is inevitable, the economic cycle is inexorable law of macroeconomic movements.
trajectory of the bubble economy and the different economic cycles. Movement cycle is a continuous process of repeated, but after the bubble economy, a sudden drop in the peak, this phenomenon of volatility for a long period of time will not be repeated reproduction.
4, two different logic
from information theory point of view, in considering an investment must be investments in the future to predict the price of each period and market demand . From the investment to come on the market, in time, there is a lag. When the time to market, market demand and prices and forecasts may have some access. Especially in the modern industrial and financial markets, the market is moving very high uncertainty. When people can not grasp the full investment decision information. It is because of incomplete market information caused a lot of investment mistakes. In the period of rapid economic growth, particularly vulnerable to over-investment, leading to distortions in economic structures. Incomplete information in this investment, the economic bubble and the bubble economy and there is no fundamental difference. One major difference between the two is that people expected future price in the logical way of thinking.
example, in the early '80s, the Chinese mainland market, a good washing machine sales, higher profits, so many manufacturers rush and on, have set up plants in preparation for production of washing machines. No matter how these investors forecast market demand conditions, their estimates of future price washing machines are only two possibilities: The wise investor will take into account if their products into the market, to ease the local shortage situation, the price will drop washing machine a range. Profit depends on whether the decrease in the price. Lack of market knowledge and those who will be very simple washing machine according to the current market price to estimate the profit after production. If the washing machine's function and quality did not improve significantly, then, in any case, no one will make such estimates: Our washing machine into the market but will increase after the market price. At the same time, in Shanghai and Shenzhen stock markets on the emergence of an enthusiastic, almost all investors are expected to invest in their stock prices following the rise again, you can make a profit. Although the investment in washing machines and invest in stocks there are problems with incomplete information, investors are quite blind, but they estimated the future price of a completely different way. Investment in the washing machine, people unconsciously recognized the market mechanism, but in the stock investment, it clearly deviates from the fundamental principle of market mechanism. Finally, the market mechanism will correct the errors in the washing machine investment, it gives the stock investment problems do nothing. This has created an economic bubble and the bubble economy of the watershed between.
5, mistaken identity, thereby adversely affecting the diagnosis
sometimes a commodity oversupply, resulting in more serious backlogs; some of the investment decision-making errors, repeated construction, all of a sudden opened many shops, international hotels, the result had to close down close down. Some people have criticized these phenomena as the bubble economy. Actually, this criticism is not the exact wording. When the market when the imbalance of supply and demand sides are based on market prices pass information to adjust their behavior accordingly. If prices rise, the demand side would be appropriate to reduce demand, but producers see profits will increase supply, the market mechanism will lead the market equilibrium to a new campaign.
Some people have borrowed heavily to invest as the emergence of false prosperity known as the bubble economy. This formulation is not very precise. Borrowing is a means of financing, is not the bubble economy, depends on these loans to be invested in what areas? If these loans were put into production areas, especially those used to develop competitive new industry, investment resulted in overall national strength has increased, this is definitely not a bubble economy. If the financial crisis, a period of time is difficult to repay the loan, even if the bad economic effects of investment, in any case, but also found a considerable number of conversion by the investment of assets. Obviously, this bubble burst, and after that nothing very different from the situation. However, if the loan is used to speculation in real estate, securities and equities, a charade, but not actually increase the overall national strength; Once the bubble burst, in addition to a lot of bad accounts, nothing was left outside, which is of course bubble economy.
Some critics said that some statistical data, inaccurate and exaggerated results, cover up weaknesses, it was a bubble economy. Others criticized that some official corruption, and some traders made money after the eating and drinking, debauchery, and this is the bubble economy. There is no doubt that these acts are wrong, but to argue these are summarized in the bubble economy.
6, the market mechanism
bubble economy because of the economic bubble and the operation of different mechanisms, measures should be taken not the same.
over-investment led to distortions in economic structures, the resulting bubble is inevitable. Note there is a market bubble is not a panacea, but that does not mean that market failure. Promote fair competition, promote the flow of information and reduce errors in the investment decision can effectively suppress and weaken the economic bubble. Strengthening market mechanisms to reduce the economic bubble fundamental way harm. In the period of economic restructuring, some government officials understand the economic laws, to use the power at whim, excessive intervention in economic activity led to many important reasons for the economic bubble. Therefore, separate government from enterprises, promote the modern enterprise system can effectively reduce the economic bubble.
the bubble economy, price increases, demand also increased, indicating that the bubble economy, the market economy does not follow the basic rules of operation. Bubble economy, market failure is a very special classic. Strengthening the market mechanism can not solve the bubble economy caused by a series of questions. Therefore, once identified some of the problem is the consequences of the bubble economy, you need to take some special measures. If at this time also that the market mechanism can finally solve the problem, then it is too bookish, is likely to lose time and jeopardize the overall situation
from - http://www.economic-theory.com/
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