Many people ask what a bubble economy means. Actually, it’s something that keeps happening repeatedly in the market, but most people still don’t truly understand it.

A bubble bursts when asset prices skyrocket wildly, far beyond their real value, because investors rush in hoping to get rich quickly. Everyone buys in a hurry, causing prices to rise even more—until one day people realize that the prices are simply too high. Then a wave of selling begins, and prices drop suddenly. That is the burst.

There are several important examples you should know. The 2551 (2008) subprime crisis, caused by a real estate bubble in America, where homes were approved for people who could not afford the mortgage payments. The housing market boomed everywhere. Banks created even more complex financial instruments. When borrowers started defaulting, everything collapsed. Bad debt worldwide reached $15,000 million.

Something close to home is the 2540 (1997) Tom Yum Goong crisis. Thailand had a real estate bubble. Foreign money flowed in to make profits, and interest rates were abnormally high, which fueled the market. But when the baht was devalued, foreign-currency debt surged immediately, and the bubble burst at once. Property values fell, and investors who had borrowed heavily could no longer withstand it. The Thai economy kept declining.

So what does a bubble economy mean? Here, the main cause comes from human behavior—low interest rates and capital inflows. Everyone sees profit opportunities and the fear of missing out (FOMO) makes people rush into the market. Speculation drives the price movement, not fundamentals.

There are five stages of a bubble that you should know. First, something new and exciting comes in—technology, an industry, or low interest rates. Second, capital flows in heavily, and prices rise. Third, excitement reaches its peak; everyone believes prices will keep going up. Fourth, people start selling profits—the first part of adjustment. Fifth, panic sets in; selling waves flood the market, and prices drop fast—when the bubble bursts.

The question is, what does a bubble economy mean, and what should we do? First, know yourself—are you investing out of fear of missing out? Second, diversify your portfolio; don’t put all your eggs in one basket. Third, limit speculation. If you see a bubble forming, be careful with speculative assets. Fourth, invest gradually; don’t put all your money in at once. Fifth, keep some cash on hand, so you can take advantage of opportunities after the bubble bursts. Finally, study and keep learning, and always stay on top of the market.

In summary, what does a bubble economy mean? The answer is: prices rise far beyond their real value, and then fall hard. Bubbles are caused by many factors we can’t control, but what we can control is protecting ourselves—diversifying risk, studying and learning, and not blindly following the trend. Looking at different markets with good analytical tools can help you make better decisions.