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5/05/2018

Easy Access to Money Spawned and Fueled the Last Bubble

Value is an agreement.  We both agree the value of this product is x.  X may be stable, it may rise or it may fall.

Let's say the ability to purchase X, got cheaper.  Cheaper purchasing power meant you could buy more products, the agreed upon value of X increased.  The product was not modified, exact same product as before.  But more people wanted the product, so quantity became limited, demand went up.

Because if you purchased a product at value X, tomorrow you could sell it for X + Y (y being profit), then it could be sold again for X + Y + Z (z being additional profit), and so on.

This speculation of an increased value of product, for no apparent reason, other than the demand increased, because it was easier to obtain purchasing power, occurred in a short time span.

The speculation grew to such heights that everyone got involved, even people that typically stayed away from investments.  It was guaranteed profit, little risk, people making money hand over fist, it inflated the entire economy across the board, with everyone's hand in the pie.

Then, when everyone was "all in", something triggered panic, everyone ran for the hills, people were left holding assets they couldn't get rid of, the market collapsed under the feet, many folks lost their new assets, the life savings and reputation.  And potentially their income streams of employment.  This rippled across the land.

Remember though, the product had an agreed up on value before any of this started.  Easy access to money spawned fast profit, everyone got in, once in, the market fizzled fast.  Leaving devastation in its wake.

There was finger pointing abound, what caused it, greedy profiteers, lax industry oversight, turn a blind eye in the name of profit and don't rock the boat.

If you look from the beginning, easy access to money spawned the fire, prolonged easy access to money fueled the fire, and then, poof.  Out went the lights.

The Housing Market shook the world.  And it hasn't recovered since.  It took the middle class down for the count.  

Easy access to money.  And then it quietly asked for everything back, with interest.