A market bubble is commonly understood as a large asset segment overvalued by speculation. Speculators in related assets are primarily concerned with reselling to a “greater fool” at a higher price. The underlying assumption is that prices will continue to rise. An expanding bubble of air eventually deflates. Irrationally inflated asset prices must do something similar. As the asset supply becomes excessive, prices drop. Incentives change well before the situation can become a crisis. Price changes communicate market incentives. Misallocated capital must then be liquidated and invested elsewhere. Losses must be rebuilt by alternative employment, savings and investment. That is … Continue reading Things Could Go Better