Student Debt Bubble - part 3 - What is a Bubble?
Article Index
WHAT IS A BUBBLE?
Economic bubbles are cycles that lead to a steep expansion followed by a quick contraction. The triggers of an economic bubble are difficult to pinpoint, but experts believe inflation and excessive pricing of specific products and services (such as tuition) play key roles. Financial roller coasters like these are unpredictable, and lead to disasters on the individual, organizational, and industry level. They can mean financial ruin for many participants who have built their businesses and lives on the high prices that come crashing down.
Homeowners caught in the housing bubble during the period of 2006-2012 faced high foreclosure rates as property values plummeted. Participants in the dot-com bubble experienced a similar crisis during 2000-2001, as people became overly-confident in the value of high-priced stocks. Many investors bought in, hoping the high-priced stocks would continue to grow and pay off. They flooded the market, purchasing shares until people realized the numbers didn’t add up and the market crashed – those who bought into the exuberance lost millions.