How economic bubble builds up

How economic bubble builds up

I have a great story about how this economic bubble created. It truly reflects the current financial events around the world. It attempts to answer the question "where does all the money go?". A very simple explanation of how the "bubble" created up.When the tiny island itself is a small island of land in this country. Money in circulation was 2 dollars as there are only two pieces of 1 dollar coins circulating around. 1) There are three people living on this island country that was. B and C each owned 1 dollar of land ownership. 2) B decided to purchase land for a dollar. So, now A and C own 1 dollar each while B owned land valued at $ 1 net asset of the country now = 3 dollars. 3) Now C thought that since there is only one piece of land in the country and land is non producible asset value will definitely want to go up. So, he borrowed 1 dollar from A and together with his 1 dollar, he bought the land from B for 2 dollars loan to C of 1 dollar, so the net assets of the one dollar B land sale. and he got 2 dollars, so the net assets of his $ 2 C, which is a piece of land worth 2 dollars but with the debt, the dollar was one of the assets at their net is a dollar, so the asset. Net income for the country = 4 dollars. 4) that he once owned land has increased in value. He regretted having sold it. Fortunately, he had a dollar loan to C. 1 He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars, payment is by 2 dollars cash (which he borrowed) and cancellation. dollar loan to C. As a result, now owned a piece of land that is worth three dollars, but since he owed B 2 dollars, his net asset is 1 dollar loan B 2. dollars to A. So his net asset is 2 dollars C $ 2 now has a net worth of $ 2 net assets of the country = 5 dollar bubble is created. (5) B saw that the value of land kept rising. He also wants to own land. So he bought the land from A for 4 dollars payment by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A. As a result, the debt is cleared and he had two dollars in net assets. His $ 2 B owned a piece of land worth 4 dollar but since he has a debt of $ 2 to C net assets of his $ 2 C loaned 2 dollars to B, so the net assets of his $ 2 net. of the country = 6 dollars; Although the country has only one piece of land and 2 dollars in circulation. (6) Everybody has made money and everybody felt happy and prosperous. (7) days of wind evil and that evil comes to mind C's "Hey, what if you land up to B can pay back the loan I have only 2 dollars in circulation, and I think that after all the land that B owns is worth at most only 1 dollar, and no more. (8) still think the same way. No one wants to buy land anymore. So in the end, all $ 2 dollars, net of the $ 2 owed BC 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar so. His net worth is only $ 1 a C loan of 2 dollars to B. But as bad debts. Although his net asset is still 2 dollars, his heart is palpitating net assets of the country = 3 dollars again. (10) who has stolen the 3 dollars from the country or not. Of course, before the bubble out of B that his estate was valued at $ 4 it is right before the collapse of the net assets of the country was 6 dollars on paper. B's net asset is still 2 dollars, his heart is palpitating. (11) B had no choice. But the bankruptcy C is to take 2 dollars bad debt to his B, but in return he acquired the land which is worth 1 dollar now owns two dollars, net of a $ 2 B is bankrupt, the property's net. He is 0 dollars (he lost everything) C has no choice but end up with a land worth only 1 dollar net assets of the country = 3 dollars. ************ ** End of story; But ************. A redistribution of wealth. As the winner, B is the loser, C is lucky that he was spared. A few points are worth noting. 1) When a bubble is building up a debt of a person to a country that is also created. 2) The story of this island is a closed system with no other country and hence no foreign debt. The value of these assets can be calculated using their national currencies of the island. So there is no net loss. 3) lower than the system will be considered on the bubble with a mean value of the land does not go down to below a dollar. 4) When the bubble burst, your cash will be the winner. Land or capital loans extended to others, loss of assets that could shrink or in worst case they go bankrupt. 5) If there is a good citizen and holding a dollar or a piece of land but refrains from taking part in the game, he will not win or lose. However, he will see the value of money or property, such as the Dow was up and out. 6) When the bubble growth stage, anyone can make money. 7) If you are smart and know that you are living in a bubble, it's worth more to borrow money (like A) and is involved in the game. But you need to know when you should change everything back to cash.

 As in the case of land that the above phenomenon applies to stocks as well. 9) The real value of land or stocks depend largely on psychology. Credit: From this idea came from since I received it in the mail. But the person who wrote it describes in detail how to create bubbles Two Thumbs Up to make him or her