Part 9/13:
He explains that bubbles are often characterized by easy credit, prolonged periods of low interest rates, and participation from unsophisticated investors, including everyday individuals who chase quick gains without understanding the underlying risks. For example, the recent prolonged zero interest rate policy by the Federal Reserve (lasting over 14 years) has fueled enormous credit expansion, leading to inflated asset prices and risky market behaviors.
Signs of an Imminent or Ongoing Bubble
- Easy Credit: When credit is readily available over an extended period, asset prices are prone to overinflation. Low-interest rates and central bank policies can fuel this environment.