Often we come across the term investment. I am sure everyone knows what it means. What most of us don’t realize is at what time can the investment be deemed as enough such that the “feel good” bubble doesn’t happen to burst?
Over 100 years of economic theory tells us that when nations and people tend to overspend, it leads to inflation. If there is a total of Rs 100 and there are total of 10 persons offering 10 different products or services each will be content with Rs. 10. The problem arises when there is another Rs.100 in the market, thus rising the market capitalization to Rs. 200. Now these 10 persons will fight for a greater share, each will sell at a premium, the one who buys it will resell at a higher premium till the time comes when no one is willing to buy it! And now the most important part: eventual value destruction. The US housing boom and fall can be easily related to this. The export sector is also among the worst hit sectors during inflation, thereby earning you lesser foreign exchange, loss of jobs and ultimately hampering your economy and bursting your bubble. But then isn’t there any way to stop the bubble from bursting? I bet there is.