The Cycle of Prosperity and Bust

I will use the familiar term “bubble” as a shorthand, but note that it confuses cause with effect. A better, if ungainly, descriptor would be “asset-price hyperinflation”—the huge spike in asset prices that results from a perverse self-reinforcing belief system, a fog that clouds the judgment of all but the most aware participants in the market. Asset hyperinflation starts at a certain stage of market development under just the right conditions. The bubble is the result of that financial madness, seen only when the fog rolls away.
Everything is a cycle, even financial markets which is determined by Demand and Supply, where the participants are you and I, which is linked to the population’s age groups, the number of young, middle-age and the old, and fundamentals of business cycles and processes for demand and supply of goods and services. Let me make myself clearer, there will be boom times, and down times which is caused by an imperfect market, the herd instinct where baby boomers start work, get married and buy a home, where they are the pillars of the economic boom, and a time when they grow old and retire, becomes unproductive and needs to cash out their retirement funds, but when all start doing at the same time, chaos will follows.
If you understand my logic, you will understand why high GDP growth never last forever, unless there is sustainment in innovations and productivity, where a revolutionary invention could prolong this from happening, where there is high growth there will definitely be a slowdown when the population ages. Therefore it is very important you must prepare for it. Spread out the effects caused by the slowdown, tweak policies to make sure there is renewal of innovations and productivity, renewal of the population.
I am 100% certain when baby boomers retire, there will be a huge lost of productivity, and unless there is renewal of the population, a slowdown of high GDP growth also, and if it is not managed properly, a bubble will form when the markets cannot support the high growth, there will be many sellers but no buyers, then the dangers of a crash, which may occur within the next twenty years.
– Contributed by Oogle.

Author: Gilbert Tan TS

IT expert with more than 20 years experience in Apple, Andriod and Windows PC. Interests include hardware and software, Internet and multimedia. An experienced Real Estate agent, Insurance agent, and a Futures trader.

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