Comments by "" (@jmitterii2) on "History Scope"
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The exact reason a bubble bursts isn't really known... often its because leverage (in debt) just becomes so severe that nobody is lending and/or borrowing. There was various preludes with downturns specifically in the stock market in the US in the 1920's: Depression of 1920–21, recession of 1923–24, recession of 1926–27.
The overall economy particularly in the US was not that swinging for most. 80% were low income to poverty. Jobs of any type were incredibly unstable.
Coming off of the 1800's, halve that century was in a recession, long depression, great depression, and or panic.
What triggers them is a variety of things from wars, direct wars, civil war, rebellion, crop failures, mineral depletion, trade shift and policy changes, and most often when during peaceful times: over capacity is reached and immediate deflationary pressures force an over leveraged system to collapse that over capacity in attempt to bring prices back to pay off those debts and stop closing businesses and evicting people who bought their homes or farms or whatever else on credit.
Noticeably, these depressions or panics happen with pre-shocks mini-recessions foreshadowing their demise; at least revealing instabilities. It doubles down investment money that can't find a reliable or desirably high enough return to stampede into whatever looks hot... contributing to a bubble. 1929 the biggest items were stocks and lesser degree commodities.
Add borrowing to the equation it makes the bubbles or an "overheated" economy boom even more, and the bust even more violent.
Overheating economy you may ask, isn't that good that things are going well?
Yes. Problem with economic systems then and just as today, it isn't efficient. It can't handle the ability of industrialization to provide essentially very high capacity; to much capacity and especially utilizing it eventually causes deflationary pressures. When debt is involved, falling prices causes the debt to become difficult to repay, at some point lowering of prices due to extreme quantity supplied, then the debt comes impossible to pay.
Our current system is inefficient and unable to distribute goods and services properly; a disconnect from growing both supply and demand in a dependable manner. It often does one or the other; and when one is out of equilibrium, it's like 3 legged stool, the entire thing topples.
And it usually does; our current system simply can't handle its own success at growing capacity and especially at actually utilizing capacity.
https://www.youtube.com/watch?v=qlSxPouPCIM
https://www.youtube.com/watch?v=TtttXC9tFPU
https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
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