Under a Bubble Economy (too German: Bubble economy) one understands a national economy and/or an industry, which is more highly evaluated by too many and to high investments, than it corresponds to the material developments. Thus the share quotations are based no longer on the actual economy of the enterprises, but on the exaggerated enthusiasm of the investors. This leads in the final result to the blow-out of the blister, which entails a rapid case of the share quotations. In many cases the confidence of the investors is so destroyed that the economy and/or the industry in the subsequent years is underestimated.

Admitted Bubble Economies

IT-industry in Germany

An example of such a bubble development is the IT-industry in Germany. Into the 1990er years particularly expected private people by this new industry high net yields and invested here increased. In the year 2000 overestimation found its high point and the bubble burst. This very day the new market under the consequences of overestimation at that time suffers.

Shares - and property market in Japan

The most well-known example of a Bubble Economy however is Japanese shares - and Immobilenmarkt of the second half of the 1980er years.

In the Plaza agreement 1985 the G5 (the USA, Japan, Germany, Great Britain, France) agreed upon a devaluation US Dollar in relation to the currencies of the other four countries. In particular the Yen made a controlled increase in value around 100%, which by speculations one continued to heat up in relation to the dollar within two years. International investors and the Japanese bought everything that had into its value in Yen, on the one hand to Yen themselves, in addition, Japanese shares and real estates, in order to profit from the increase in value of the Yen. Stock exchange and property market were continued to heat up by the demand, and a spiral upward began.

In the Louvre agreement now be against-steered and the dollar should again be revalued, but the spiral in Japan kept turning itself. On the high point of the blister the park of the emperor palace was in the center from Tokyo to estimations just as much value as all country in California together.

Severity Japanese editions, the mutual support in the economy and the almost price of the enterprises prevented with the fact that a Japanese enterprise was taken over. The Japanese enterprises profited from (in the comparison to the USA) risen the value of its shares and properties and went in the USA on purchase and assumption route. The fact that the risen value of the Yen increased also labor costs in Japan relative to the remainder of the world adjusted the Japanese enterprises thereby that they continued to shift production abroad, in particular to Southeast Asia.

The situation became risky, when Japanese banks began to spend by the overestimated real estates against-financed credits. In the year 1990 the blister burst. The value of the real estates sank within short time on a quarter back and the stock market imploded. The banks remained sitting on their credits. Several large Japanese banks and life insurer had to announce bankruptcy, others could by the government be saved.

The Japanese economy could not recover several years from it, this time in Japan also as the "lost decade" is designated. This time was coined/shaped by deflation and zero growth (see also Kakaku Hakai). Only slowly the banking could be reorganized, and the national indebtedness rose by again and again verpuffende economic situation programs to over 150% GROS DOMESTIC PRODUCT.

After the economic crisis also the political crisis followed. In the hot phase of the Bubble Economy many politicians let themselves be taken part in a well-meaning manner in the excess of money of the economy, which grassierte corruption. In the year 1993 the entire LDP guidance was complicated into scandals. It lost the House of Commons elections and did not place for the first time for the fifties not the majority in the cabinet.

Articles in category "Bubble Economy"

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