[FOUNTAIN]Tiny bubblesTulips, a flower of the lily family, have a traditional significance of a “confession of love.” But in the mid-17th century, Dutch painters used tulip as symbols of vanity and greed. The price of tulip bulbs had become so expensive as to approach the price of a house ― in other words, a bubble developed.
Soap bubbles, glittering with multiple colors, can mesmerize people, but they disappear in the blink of an eye. In economics, a bubble is defined as a situation in which prices rise far above actual values for no justifiable reason. A bubble is created not by real demand but by speculators. That speculative demand is not perennial, however, so it has been the usual experience that the bubble eventually bursts. But each time, many a wishful person confidently declares that it is not a bubble this time and even if it is, he can get out before the bubble bursts.
Some say that man's love of money ensures that there will always be bubbles, and they cite the 1720 Mississippi bubble in France and the 1840 railroad bubble as good examples of breakdowns in economies. The Internet bubble of the late 1990s is said by some to be the strongest since the Dutch tulip bubble. In Japan, the bursting of the real estate bubble cast the country into a lost-decade of economic stagnation. Edward Chancellor, author of “The History of Financial Speculation,” called the 50-fold inflation of Japan's land prices in the period spanning 1956-1986 “Kamikaze capitalism.”
Charles MacKay, the first writer to address speculation, in 1841, said that speculation is the most lucid illustration of how a society can easily fall into illusion and group frenzy. The Economist, in a recent edition, warned that the world land market was a bubble that will deflate in the next several years. Meanwhile, Park Seung, the governor of the Bank of Korea, last month said the Korean real estate bubble will soon burst, but “the shock will not be as big as it was in Japan.” As things stand, we can only hope that Mr. Park is right.
by Lee Se-jung
The writer is a deputy business news editor of the JoongAng Ilbo.