What causes economic bubbles? - Prateek Singh
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- Опубликовано: 10 сен 2024
- View full lesson: ed.ted.com/less...
During the 1600’s, the exotic tulip became a nationwide sensation; some single bulbs even sold for ten times the yearly salary of a skilled craftsman. Suddenly, though, the demand completely plummeted, leaving the tulip market in a depression. What happened? Prateek Singh explains the peak of a business cycle, commonly referred to as a mania.
Lesson by Prateek Singh, animation by Simon Ampel.
Years later someone would be studying the crypto and NFT bubble.
"YES, HISTORY DOES REPEAT ITSELF."
@@puckchang8691 except NFT's and crypto are completely different. One is backed by real currency. One can be right clicked.
@@bigbirdmusic8199 Yes, but NFTs have an infinite amount of value due to social recognition.
@@eunkyungcho3477 Except they are basically a pyramid scheme since they have no real value unless you hook more people into your NFT, and they hook others as well... while you're not offering any actual product
@@YouMakeMyMotorRun same goes for fiat money. Are US dollars a pyramid scheme?
I can better understand the attraction of tulips than of NFTs .
I am happy that these videos exist. Thanks TED-ed
Me too I all way see one every day
@Himanshu sharma 😊
The animation of this video is remarkable !
I watched most of Ted-Ed's vid becoz of the animation
History repeats itself, now we have NFTs
@MLG Joe 😂🥲
@MLG Joe cryptocurrency tied to digital "property." effectively you can buy a certificate that says you own something and that certificate is backed by a crypto blockchain. But you still don't really own the property, as ownership with digital goods is already subjective as is, in this case it's even more confusing.
and crypto
Bitcoin honestly kinda worrying too with how absurdly high it's price is... it was initially meant to be a form of currency not get rich quick investment.
@@That_One_Guy... yeah, Bitcoin now cannot be used as a real currency because of how whales are manipulating prices. Too volatile to be used in real world transactions for businesses. and people now don't even care about what BTC was really intended to be, all they care about is swing trading it to make a quick buck or gamble
It's hard to predict the future until we see this month’s inflation results. However, historical data consistently show that stocks tend to outperform bonds in the long term. Therefore, I'm staying in the market and focusing on selecting high-quality stocks. The challenge lies in identifying these stocks.
I wholeheartedly agree, which is why I choose to delegate my daily investment decisions to a coach. Their specialised knowledge, research, and risk management skills make it challenging for them to underperform. They focus on utilising risk for its asymmetrical potential while mitigating downsides. I've been with my investment coach for over two years and have earned over a quarter-million dollars.
Good, what's the process for getting in touch with your guide....
There are many financial coaches who excel in their profession, but for the time being, I employ Stacey Lee Decker because I adore her methods. You can make research and find out more
Basically, the economy cycle has a scam to it.
When FDR tried to get the not-for-profit banking system started for the first, he probably did sound like a welfare queen
The first day Social Security started. At the start of this economic cycle, the old retired people started withdrawing from the retirement plan, even though they never paid into the program one penny. This was a mathematical necessary coincidence. It's not meant to be free welfare. Just keeping the economy rolling steadily.
Basically, the stockmarcket is the same as Social Security.
Basically, the first investors saved nothing and received a five-star retirement. Basically, the first investors did receive a very high interest rate.
The first people withdrawing from Social Security never really ever contributed. This necessary free retirement plan to those first retirees was necessary. Who never paid for it in the first time around. It was just a side effort on a new not-for-profit banking system getting up and running. This was not defict spending to get the program started.
I hope there were no hard feelings for those first-time retirees receiving benefits from Social Security they themselves never paid for. AKA Passive income. This is why the not-for-profit banking system has a limit on it. For example, it must be 65 years old to withdraw. Take your turn, or take a number and wait your turn.
I could imagine there were salty people about the Social Security program when it first started. To see the new retirees receiving benefits they never paid for. The beginning of this not-for-profit cycle.
Where the younger you are, the more years of actually contributing they would do for the same retirement. These people would be at the end of the cycle. Basically, there are zero percent interest rates at the end of the cycle, while their grandparents received "profits." From the beginning of the cycle.
Everyone didn't really pay their fair share. Deductions out everyone's earned, active income were longer than others. Depending on if they were at the beginning of the cycle or at the end.
First, in on an investment or last in on an investment.
Basically, the original order people made out pretty good, AKA the rich. Got in on Social Security but never spent years paying in on. But the very younger generation had a full price tag and zero interest rates. And their whole life paying Social Security payments.
I'm sure the stockmarcket is treaded the same way as Social Security. Both not-for-profit banking.
"Each generation pays for the generation before it." Is NOT the correct way to look at it.
Any of you guys bankrupt yet?
0:33 'the price rose and rose...' hang on aren't we talking about tulips? XD
Noticed it thanks to you.
the rise in price of tulips, rose is the past of the word rise
@@_HuynhThiMinhKhue he is just joking, but thanks for explaining it
@@_HuynhThiMinhKhue I know, but the way he said it - 'the price rose and rose' made me think of roses when we are talking about tulips
@@_HuynhThiMinhKhue ok, Shakespeare lol 😂😭
These bubbles also lead to economic recessions, and when the busts are really big, they lead to depressions. In the US, the recession occurs every 5-8 years. Even during the gold standard periods, booms and bust still happened.
I mean there was only one Great depression the other ones were just recessions which was a lot different than than another depression
There is a huge difference between the stockmarcket going up in mass, vs. The stockmarcket is going up with interest rates. These are NOT the same excomponent. GDP does include unearned income.
I hope you can see that I just stated an impossible math formula.
Because the people who know math. We are watching the stockmarcket going up during the pandemic, while the government is deficit spending. We know its going up in mass. Not dividends being paid.
They shouldn't gaslight us. We all saw the stockmarcket went up during a pandemic.
Let me explain the math of "the rich."
Let me explain why our economy has cycles. These cycles do not last long enough for me to make a 30-year mortgage payment.
Basically, the stockmarcket is the same as Social Security. The same math.
Yes. Take Social Security. "Each generation pays for the generation before it." Is NOT the correct way to look at it.
Technically, by indirect force. Not direct.
Mathematically, the incoming money at the bank must match the outgoing. True. But by just a necessary coincidence.
The first day Social Security started. At the start of this economic cycle, the old retired people started withdrawing from the retirement plan, even though they never paid into the program one penny. This was a mathematical necessary coincidence. It's not meant to be free welfare. Just keeping the economy rolling steadily.
The start of these cycles, houses are dirt cheap too.
Basically, the first "investment saved nothing and receives a one-star retirement. Basically, the first investors did receive a very high interest rate.
The first people withdrawing from Social Security never really ever contributed. This necessary free retirement plan to those first retirees was necessary. Who never paid for it in the first time around. It was just a side effort on a new not-for-profit banking system getting up and running. This was not defict spending to get the program started.
I hope there were no hard feelings for those first-time retirees receiving benefits from Social Security they themselves never paid for. AKA Passive income. This is why the not-for-profit banking system has a limit on it. For example, it must be 65 years old to withdraw. Take your turn, or take a number and wait your turn.
I could imagine there were salty people about the Social Security program when it first started. To see the new retirees receiving benefits they never paid for. The beginning of this not-for-profit cycle.
Where the younger you are, the more years of actually contributing they would do for the same retirement. These people would be at the end of the cycle. Basically, there are zero percent interest rates at the end of the cycle, while their grandparents received "profits." From the beginning of the cycle.
Everyone didn't really pay their fair share. Deductions out everyone's earned, active income were longer than others. Depending on if they were at the beginning of the cycle or at the end.
Basically, the original order people made out pretty good, AKA the rich. But the very younger generation had a full price tag and zero interest rates.
I'm sure the stockmarcket is treaded the same way as Social Security. Both not-for-profit banking.
"Each generation pays for the generation before it." Is NOT the correct way to look at it.
Are you telling me that having to continually bolster the strength of a currency and therefore massively damaging export industries causes recessions? I never would have guessed.
You seem to have totally missed out on, or at least not mentioned well enough, one of the major things that fuels these bubbles: investment. People weren’t just buying tulips or whatever because they were desired; they wanted tulips *because* of their rapidly rising prices, since they could make massive profits upon selling them. That was what was fueling the feedback loop you mentioned: people bought more because they hoped to profit off the price rising, and the price rose because people were buying more. Maybe you did mention it, but you worded it extremely poorly if you did. Especially at 2:36; that explanation did not make a lick of sense.
It had the sense of a Ponzi scheme in that people overpaid for tulips because they assumed that others would overpay to an even greater extent and so on. Until there was no more "and so on".
Perfectly explained the feed back loop. I was also thinking why tf would people desire tulip that much. Your comment made sense.
@@TON-vz3pe You're welcome.
You're Actually Right But Then He Perfectly Explained The Missing Point Of Investment With Stock Market Example.
Bunch of thanks 🙏
You comment make sense!❤
I laughed my ass off at 2:10. "Pokemoon cards" combined with the face.
didn't realize it was pokemoon, lol
Now there are many worth thousands
And no one ever bloody learns.
Hey, wanna invest in bitcoin ?
I did
@@Opscury we learn'
@@Anku-xi5yz no
Yeah, because organisms, viruses, and aliens are never learn
Unlike robots, machines, and computers
It's not greed, it's the missjudgement of people for placing too much value on things that actually don't have as much value. Like the educational bubble for example, day by day it's more easy to access all the information you would at university online, and thus eventually making the education system obsolete.
Interesting, I never came across this. Can you provide more info articles on this. I would like to read. But much of this is primary education. Not University. Though there are some high level online material this is only for theoretical subjects. If study needs practical like medical or civil engineering, mechanical engineering then it becomes tough.
But will I get a job at say Goldman Sachs without a degree even if I have completed all the required courses online?
What degree do you have?
I spent a _lot_ of time on RUclips watching TEDEd.
You're hired!
Really?
No, get out of my office and get a degree.
R. Alley Literally this guy is probably some drop out who's mad that he can't get a job because he doesn't have an associates. Ignore him lol
While I see your point, going to brick and mortar is valued by employers in ways beyond the education in itself.
To be fair, some manias are seemingly created by the industry to make more short term cash. I mean, just LOOK at the South Sea Bubble. If that wasn't intentional manipulation of the market, I don't know what is.
I heard someone say "The South Sea Bubble" and I just had to make an appearance.
@Dylan Chin I T W A S W A L P O L E
this is obviously an oversimplification.
A lot of times bubbles are created by market manipulation.
A case and point is the recent house bubble where government created programs to allow people to lend money which they couldnt possibly pay back.
This lead to the housing bubble.
+princeofexcess yeah, housing bubble back before more likely because of debts. People pay for the house aren't using dollars. But more likely mortgages and credits.
Muhammad Daffa "housing bubble back before more likely because of debts." ? I dont understand this sentence.
+princeofexcess well sorry for my bad grammar though. Back in the 2008 when housing bubble that caused financial crisis from mortgage loans and credits. People can't afford the debts because of recession.
Muhammad Daffa You are right people cant afford the debt because recession but you have the cause and effect backwards.
People took out loans they couldnt pay back and that caused a bubble which burst and caused the recession (and that caused more people not to be able to pay back their loans which worsened the recession) Thats how bubbles usually work.
But the first cause is people being able to take out loans they couldnt afford in the first place. And government made sure that this was possible.
princeofexcess that's why the loans are not being efficient till now. But US still printing credits over moneys that causing money = debt. I agree with you that the problem was people can't afford the credits or loans at the first place. And now credits more printed in thin air rather than money. That making problems even higher.
So were not going to talk about the Federal Reserve and their ability to artificially lower interest rates?
No.
In my opinion this could be an ideal example; how psychology is interrelated to economy.
Are we currently in a bubble with all this app shit? A lot of these companies like snapchat are valued in the billions, without even having made a profit.
Andrew Ryan I believe the value in apps like Snapchat lies in all the data - the information - they gather rather than the profit they make.
+Phil Fish well we are in the tech bubble now
+Fill Phish wow i have to search more info about this . Sound interesting
I think so. And like Myspace any day new app can replace the older one. And without a model to make profits it only results in severe losses. Twitter is so famous and still havnt figured a way to make money.
mahesh katta
they sell your information to make profit
It pretty simple to explain why the housing bubble happened. A lot of parents gave there children the advise to buy a house as soon as possible, because then the would have to pay rent. Which isn't a bad advise, but because young people generally make bad decisions, they bought houses they couldn't afford. We have to same problem now with higher education. Most parents tell there kids to go to college, which isn't a bad idea. But again young people make bad decisions, like going to colleges they can't afford or major in stuff like women study's, where the only jobs are becoming a professor and reteaching.
NinjaEule It wasnt the young that bought the houses either. You had people getting approved for homes they should have never been able to afford due to lending tricks. Those loans came due and they couldnt afford the house anymore.
TexasRedneck Sure that was also the case. It was just a lot of people making bad decisions. I don't know all the reasons why people made this decisions, but i know its pretty much common advise that you should buy a house to safe on rent and the faster the better.
NinjaEule The bubble burst when the young were unable to buy houses any more.
I don't know the numbers from other countries, but in the Netherlands you can clearly see the price of a house first moving from the single earner to the double income model during the eighties and then the bubble starts when prices outstrip income growth using mortgage schemes based on "investment" in the stock market, the house itself and other such folly. House prices outstripped people's ability to pay them based on their own income becoming pure speculation. The problem was a lack of historical perspective and ability to analyse the market. Just like with the "internet bubble", people perceived the fast growing house prices from the previous decade as the new norm, while they were only the effect of more and more women entering the work force.
I know a mortgage broker that left a big bank and started his own shop in the mid-nineties as he understood what was happening and didn't want to be a part of it. so it wasn't like nobody knew or understood what was going on.
RogerWilco You are right, when you say that it wasn't like nobody knew what was going one. But sadly most people didn't listen to the people with good advise, because they thought they would miss out on something. Its the same with the higher education bubble, people still major in liberal arts because they don't see that its a bad investment. They just think that if they don't go to college or major in a STEM field, that they would miss out on the college experience.
kindergarten antipun
A small difference between tulips and house estate ; if you have tulips and the market crashes , soon you will have nothing since flowers tend to fade and die ( in fact they are useless to your surviveal ) ; but if you have a house , it may loose value but you have a place to stay , to live ...
Greed.
***** It's actually one of the best things with humanity. Greed for love, money, life... but the bad thing is that it is extremely difficult to determine VALUE. Both for your self and for others and the FUTURE VALUE is even more difficult. Being greedy is good, because that means you want to maximize profits, which is good, because without profits we wouldn't have anything left to spend after our hard work. Many greedy fools think that just because something is rising in price equals rising in value, which is false. Actual value is determined by the profits and growth of something. Without considering fundamentals of an assets it's easy buy something that is overvalued. It feels great on the hype, but when the hype is over and there is too few buyers and too many sellers, the price comes down to reality, often to undervalued - this is when you buy.
***** I think most people are zombies, becuase they are just followers. They do not think for them self.
***** It's Jon frekin' Gomm!! You are awesome by the way :)
***** Greed is a good thing as long as there is no corruption.
Without greed we would still die in our 20s and technology would never get past the stone age.
Indeed. Greed in trying to make money turn to more money with no work involved in the process drives bubbles.
Thank you... I hate my education system. I'm in a mania for knowledge thanks for providing for free. 😉
Now the bitcoin is becoming a bubble.
lason it has been a bubble for 10 years now?
only last few that it actually become one, back in the day it didint have enough exposure.
hi i'm from the future and it was a bubble
If you notice the value of bitcoin in the stock market, you can see that its value either rises to staggering price and then suddenly loses its value on the next opening of the market.
lason no its not
More and more I see such things.. I realise simplicity is the answer!
3:06 the look on his face as he looks down on the flower and realizes its just a freaking flower
🤣
Can we just praise the amazing animation for a moment? Like, HOW IS IT SO GOOD?
Sure and I agree with you
*Like Bitcoin?*
Bitcoin brought me here. Let's see how it goes in 2018
bitconeeeeeeeeect
not too well. hope you sold already lmao
Right in the spot *cough*
Just like bitcoin. Price is the same as it was 5 years ago and will continue to plummet.
3:20 "And pop" - that sound is weirdly satisfying
No one:
1600s Europeans: I just bought my virus infected Tulip by an amount more expensive than my house.
Centralized banking usually causes these bubbles. Under Alan Greenspan, there were two bubbles (Tech and Housing).
I am of the opinion that a centtalized bank makes it more likely to have a signifcant bubble but they are not the cause of the bubble.
Allow me to explain what I mean normally a market bubble whould be quite small but if the central bank misinterpretes it as real market growth they may tell investors to invest in that which in turn makes the bubble bigger and then the bubble becomes big enough to afect the economy as a whole rather than the issolated part it whould have affected otherwise.
P.S. I know that the grammar is probably horrible but I typed this on a phone.
No offense but this did not explain what causes people to realize what it was worth , what specific moment or event that made people change their mind. That’s precisely what i’m trying figure out.
"Who decided tulips were so great?"
-Seth MacFarlane as Peter Griffin, Family Guy
This shows a rise and fall in demand for a product and it's price this is very interesting and I also study economics
An example I know is Japan's bubble economy, so I looked it up and found that in the case of Japan's bubble economy, stock prices of real estate and land rose. In Japan, due to the ultra-low interest rate policy during the boom, people began to invest, and the resulting bubble burst as real estate and land prices plummeted due to Japan's interest rate hike. In the case of Japan, it seemed that a country's economy was shaken a lot when large companies went bankrupt. I'm worried because the economic situation in Korea seems to be similar.
Tesla's P/E ratio is above 1000 today.
I've heard this explanation a million times, I could easily recite it myself, but I still feel like I don't understand. I feel like this type of explanation is just the gist of what's going on. What causes that collective realization that the item is worth less? How does that physically manifest? What substantive occurrence is the stock market reacting to? Lesser sales figures? People selling off stocks? Is the latter a cause of the stock market reacting, or is it a symptom of the stock market reacting?
Did you ever get an answer for this? I suspect it might be a case where, a small group that was formerly involved in the bubble, pulls out or begins expressing doubt, which in turn influences a much larger body.
How do you decide the 'intrinsic value' especially of a non-financial asset? If it took long time to grow tulips, surely their intrinsic value must've been high if cost of production is any indicator of intrinsic value.(opportunity cost of time of growing tulip is high)
Without all that hype, how much are you willing to pay for the tulip?
Nothing is just a grass we pick them up in the jungle for free
Tesla shareholders should see this video.
I really want Hong Kong real estate market to bubble ASAP
Describes the stock market and crypto. Almost 30k for btc which can't be used for anything else other than trading.
Thankyou so much~
I was looking for this such information
Euka
You look so cute 😊😊
Bubbles happen because of mass psychology. This is what technical analysts take advantage of in every asset class. Look at the stock market today. Its overvalued, but I know it will carry on for at least another decade and get more and more ridiculous just by looking at the charts. I've always despised the way humans behave in large groups and the only way to cope is to make money off of that group behavior. We are worse than ants
Why will it last another decade?
@@ytyt9654 Because of the momentum on the monthly charts and the corresponding fib targets. Also central banks and corrupt globalists need time to take profits as we march higher. The biggest stock market crash is waiting for us at the end of this, so protect your profits as best you can as the charts start to deteriorate. My best guess is when the DOW hits 100K we get a mini crash before the melt up and then an epic crash that leads to global war. Get your reservations to space if you can afford it by then
@@rudeboymon3177 lmao bro damn. Thanks ig
Amazing video. Thanks for the explanation. Now i know what's a bubble.
Kudos to the artist who drew this stuff!
Its pure greed. We humans are pretty stupid...
Zoink foo more of a cult, than a greed. its weird to say greed about tulips.
Theo Starodubov
I wasn't referring to the tulip frenzy, more the stock owners instead.
Zoink foo ok then, maybe. but i would totally do that myself - mess with people for better business. If product is not essential, price is never too high if people are paying that price. Doesnt seem immoral to me, just a bit funny.
Zoink foo More like over-speculative markets with people not looking at the intrinsic value of the item in question. Or rather, people just not continuing to pay more and more, as there's no such thing as intrinsic value, simply what we are willing to spend.
And when one person stops buying, people stop thinking that the price will keep going up, and so their speculated value drops.
I like how this video pops up in my news feed, together with Cryptocurrency Videos
still keeping pokemon cards
Beautifully Explained 💯👏
Thank you, I enjoyed watching this.
That Pokémon card joke was truly a prediction of 2021…
Use me as the "I'm here to learn about NFT's" button.
Thanks Kunal Shah!
And by treating myself by buying tulip, I unconsiously helping another tulip mania as the others who watched this and one who think it is a new trend of some sort.
My ancestors shorted the tulip market and we are still living off the profits! I feel bad for the people who held until their tulips died.
0:33 I thought it was a tulip? :P
great video! it taught me a lot! :)
BUT WHAT CAUSED THE PEOPLE TO REALIZE SUDDENLY THAT ITS JUST A TULIP?? THE HIGH PRICES
Bitcoin owners, own nothing except a number in a blockchain. How can that be valued at $30.000 or more?
basic. In order not to create a bubble, you have to maintain the stability of prices, even if wages are raised. Maintain the stability of prices, and the economic inflation will remain at the same level.
Best youtube animation I've seen yet. More please :D
klo di indonsia model seperti ini sudah banyak...dari ikan arwana sampai batu akik..sekarang...sudah crash....batu akik yang di beli jutaan rupiah di jual 100rb aja pada ga mau
👍
Kalau arwana memang exotic dari jaman ke jaman. Anturium itu permainan pedagang sampe rusak dan ga ada harganya. Sayang trend model ini terus-menerus ada di kita ya.
Kalau sekarang ada boba & kopi2an om. Lg trending, suatu saat bubble. Dan yg paling kena yg buka terakhir2 😁😁
@@agapheputrasusilo741 janji jiwa wkwkwk
@@agapheputrasusilo741
FnB bubble mah dari kapan tau
Adalah tahu bulat, ayam geprek, kloningan Starbucks, Ayam Goreng kaki lima (pemicunya ya si Sabana)
Economics is rarest thing to find exciting except of these Ted and EE.
I think the mania is already starting. The phone mania
I study english at the same time when i learn about investing with this video big thanks to the creators ❤
My teacher told me that the Filipinos once exchanged huge quantities of gold for a few pieces of mirrors offered by the Spanish years ago. Scamming is everywhere and everywhen ever since trading started.
Whats wrong with it gold also don't have any intrinsic value it has value because of scarcity at that time i think mirror was more scare than gold so it was a nice trade
I love the animation in this. Good stuff.
This lesson is by Prateek Singh, the one with whom Tanmay Bhat collabed in his trading series
“Well, countries today should have learned the lessons from the Tulip Mania in 17th-century Netherlands. If did, then there will be no economic bubbles by now.”
- My Quote
RE: Gamestop - ... And that is the reason why Short selling is good for the market.
Really nice animation style!
'The Big Short,' and 'Margin Call,' in which it was theorized that 'we can't help ourselves.' Or, to put this observation a different way: 'Those that don't (or won't) learn from history are doomed to repeat it.' Alas and heck.
Before there was NFTs and crypto, there were tulips.
Beautiful animation.
So when something is too good to be true. It is due to time.
Great 🥳💞💞💞💞👌🏾👌🏾💚💚♥️💕💜😃😃❤️❤️❣️🤩😮😀👌👌👌👏🥳🥳🥳😃❤️❤️❤️❣️💟❣️💔❣️🥰
So... where does one acquire one of those fire hoses that spew money?
Good Tulips. Thanks to them we are still living in richness!
So the bubble made the tulip, rose. XD
I know I'm pretty late to make this joke.
How much would you pay for a bouquet of tulips? A few dollars? A hundred dollars? How about a million dollars? Probably not. Well, how much would you pay for this house, or partial ownership of a website that sells pet supplies? At different points in time, tulips, real estate and stock in pets.com have all sold for much more than they were worth. In each instance, the price rose and rose and then abruptly plummeted. Economists call this a bubble. So what is exactly is going on with a bubble? Well, let's start with the tulips to get a better idea. The 17th century saw the Netherlands enter the Dutch golden age. By the 1630s, Amsterdam was an important port and commercial center. Dutch ships imported spices from Asia in huge quantities to earn profits in Europe. So Amsterdam was brimming with wealthy, skilled merchants and traders who displayed their prosperity by living in mansions surrounded by flower gardens. And there was one flower in particularly high demand: the tulip. The tulip was brought to Europe on trading vessels that sailed from the East. Because of this, it was considered an exotic flower that was also difficult to grow, since it could take years for a single tulip to bloom. During the 1630s, an outbreak of tulip breaking virus made select flowers even more beautiful by lining petals with multicolor, flame-like streaks. A tulip like this was scarcer than a normal tulip and as a result, prices for these flowers started to rise, and with them, the tulip's popularity. It wasn't long before the tulip became a nationwide sensation and tulip mania was born. A mania occurs when there is an upward movement of price combined with a willingness to pay large sums of money for something valued much lower in intrinsic value. A recent example of this is the dot-com mania of the 1990s. Stocks in new, exciting websites were like the tulips of the 17th century. Everybody wanted some. The more people who wanted the tulip, the higher the price could go. At one point, a single tulip bulb sold for more than ten times the annual salary of a skilled craftsman. In the stock market, the price of stock is based on the supply and demand of investors. Stock prices tend to rise when it seems like a company will earn more in the future. Investors might then buy more of the stock, raising the prices even further due to an increased demand. This can result in a feedback loop where investors get caught up in the hype and ultimately drive prices far above intrinsic value, creating a bubble. All that is needed for a mania to end and for a bubble to burst is the collective realization that the price of the stock, or a tulip, far exceeds its worth. That's what happened with both manias. Suddenly the demand ended. Prices were pushed to staggering lows, and pop! The bubbles burst, and the market crashed. Today, scholars work long and hard trying to predict what causes a bubble and how to avoid them. Tulip mania is an effective illustration of the underlying principles at work in a bubble and can help us understand more recent examples like the real estate bubble of the late 2000s. The economy will continue to go through phases of booms and busts. So while we wait for the next mania to start, and the next bubble to burst, treat yourself to a bouquet of tulips and enjoy the fact that you didn't have to pay an arm and a leg for them.
I LOVE TED-ED❤❤❤
Animation 💯💯🔥
The answer: a bubble expands by greed of the owners of means of production and explodes when the customers have got enough information.
Kudos to the illustrator.
So is this what happened with the Game Stop stock a few years ago, or is that different?
That was a meme turned into market manipulation, people where intentionally causing the prices to be high.
awesome videos....this is infotainment at it's best. i would pay for content like this
But what happen when you can control when the bubble is burst?
How can you say somethings "real" value is lower than the price when value is subjective?
It's not entirely subjective. The minimum cost of an object (which you could ague is its intrinsic value) is how much time and effort you put into it. Because that time and effort could have been applied elsewhere. Would you accept a mere dollar for a bottle of wine that you fermented for a year? I don't think so. That's because you couldn't do much with the dollar and it probably cost you most than a dollar to prepare the wine in the first place. I hope this helps.
I'm in the 261 club!
Excellent video for excellent cause.
Sami S Did you tell your friends and family the big news yet?
well explained
The crypto bubble will be the next to pop.
Two years later and we are still going strong
"I don't even know what that means." - Eugene Fama, when asked about the role of a credit bubble in the 2008-9 financial crisis. (Later won the 2013 Nobel Prize in Economics.)
+Mian Fei Wow
I love this animator!
there was a movie about Tulip fever
THank you so Much, for sharing knowledge.
i think there gonna be another one Bitcoin!
This didn’t age well
@@HoffMan3102 this didn't age well
Durian will be the next tulip (in south east /east asia at leaat)
Anyone else here for the 2022 bubble???
its the willingness of us to buy something even though it's in ridiculous price
We give things value, and collectively agree on what that value should be. Hense, why we have bubbles.
I don't like or buy flowers. I rent instead of own a house. I would not partially own a website, and I currently don't have any investments (stocks, bonds, mutual funds, retirement savings, or savings). Therefore, if you don't have an interest in something, what value does it give you?
The Big Short brings me here. I've been thinking about virtual items like Dota 2 cosmetics this way since the first 'Arcana' item sold at steam but I don't know what this is called (I'm asian and english is not my native language).
This film (big short), Wikipedia, and Ted's animation make a lot of sense and thank you that I know what it is called and the reason why it happened in the first place.
+Fiqih That movie is nice but it is still a move and doesnt present most of the fact about subprime crisis 2007-2008. If you want to know more u have to do your research.
Hoàng Vũ
yeah, but getting the big picture is the first step to know what's the idea
Coming to understand tesla stock today.
This is a little left-of-field but I wonder if social media is a bubble of its own kind - or more precisely excessive use and our current relationship with it as societies? So many people use it and often get caught up in a false sense of reality to varying degrees but perhaps soon enough the world may collectively wake up (perhaps emerging from some tentative conversation that evolve into a hot cultural topic). Then we might see a sudden shift toward healthier social media habits, the collective realisation that digital addictions are serious and a push for a better world.... Or not. But one can hope lol.
Another bubble from the 90's was the Beanie Baby craze. It was just as silly as Tulipmania. People were paying thousands of dollars for little stuffed plushes mass produced in China. Then the bubble burst. Today, you can go into any thrift shop buy a Beanie Baby for 50 cents.