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Bubbles - the Good, the Bad, and the Ugly

Posted on March 20, 2008

The term bubble has become a commonplace. For every item which goes up in price, a pundit can be found who identifies a bubble. We are experiencing a veritable bubble in bubbles, so to speak.Speculative bubbles share some common features, for example, high credit growth, high turnover, speculative mood, it s different this time -rationalizations, media frenzy, and an increasing growth rate of the price of the bubbly asset. However, bubbles differ in the degree of harm they do: there are good, bad, and ugly bubbles. Bubbles have allocative and distributive consequences: first, bubb...

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economy , inflation , tax