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A bubble is the overvaluation of something. Overvaluation can only occur if there is surplus value in the market that's not needed in other places. Surplus valu
by ryanaAM 14y ago
A bubble is the overvaluation of something. Overvaluation can only occur if there is surplus value in the market that's not needed in other places. Surplus value means there's more money in circulation than the market needs - That's inflation.
- skylan_q 14y agoPrices get bid up, but price inflation is different from inflation. Price inflation is the increase in prices brought about through the auction mechanism. But in our circumstances, we get economy-wide price increases because of increases in the total stock of money. Price inflation causes money to lose value, so we can't really say there is an overvaluation simply because prices have increased. It could very well be the case that valuation hasn't drastically changed at all, but newer, cheaper money is flooding in which causes price inflation.
- eli_gottlieb 14y agoThere's obviously a market in need of that money, though. It's called the labor market. What's going on is that there are profits in the economy without an outlet for making more profits.