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Sure it does. The market for beer bonds doesn't exist if there isn't an ever increasing ceiling on the price of the asset that bond is backing. In this story b
by enjo 15y ago
Sure it does.
The market for beer bonds doesn't exist if there isn't an ever increasing ceiling on the price of the asset that bond is backing. In this story beer went to $18 and everyone was willing to pay it, not because it was worth $18 but because no one was having to actually SPEND anything (yet) for it (except those buying the bonds).
It may not have been the most important thing, but you need the "bubble" in the story for the bubble to "pop":)
- zeteo 15y ago>The market for beer bonds doesn't exist if there isn't an ever increasing ceiling on the price of the asset that bond is backing That's not correct. The market expands as new bonds are issued. The key factor is that further credit is given, regardless of the size of each individual loan.
- aaronklein 15y agoBoth factors help increase the total size of the bubble.
- zeteo 15y agoYes, but this is about what causes the bubble. Sloppy credit is necessary and sufficient for that. Price increases are at worst an aggravating factor once the bubble is already under way.