i try to understand how bubbles work on economic , and well , its like pyramid scheme i guess .
for example : person X bought doge at 0.5 cent price , then the price rise to 2 cent , and after that, person Y bought doge on that price , and a few moment later , price rise more to 5 cent , and the person X sell his doge at 5 cent price , and after X action selling his doge , the price down to 4 cent , then person Y reallized this is the limit i must take, then he sell it , and make the price go to 3 cent , then person A think probably a correction , then he join at 3 cent price.
well , probably i am wrong , but from that explanation, economic will growth for some reason.
I see the economic modelling of bubble to produce the following results.
1. If initially growth was at 0.50%
2. With bubble the growth would probably rise to say 5.0%
3. The 4.5% increase will create some chain reactions.
4. But if we have a correction of say 4.5%, the money in circulation will be wiped off.
So, economically I see bubble to have a net value of 0.
From my perspective, the economy is somehow positively affected by bubbles. By that I mean, bubbles do add real value to economic growth. However, the overall can show a different picture from an individual one. Many people might lose their money during this occasion while companies, firms, big players are the ones receiving huge advantages in various ways. But as long as the economic growth, Bubbles are still harbored and manipulated. Thus, just try to make as much money as you can with this scheme. Remember to be very careful because you can lose all of your money if you arbitrarily invest in extremely intense bubble
You know there are two types of economic growth in economic science.
1. Nominal GDP Growth
2. Real GDP growth.
If there is any impact that bubble could have on the economy is nominal because of inflated prices.
[moderator's note: consecutive posts merged]
