Recently, while studying market history, I discovered a particularly interesting phenomenon—almost every certain period, a new economic bubble appears. This made me start to think: why do humans keep repeating the same mistakes? How exactly do economic bubbles form?

In simple terms, an economic bubble is a period of rapid economic expansion driven by speculative enthusiasm and excessively high asset prices. When a certain asset begins to rise, more and more people follow the trend and invest, causing the price to continue soaring, eventually breaking through sustainable levels, leading to selling and a sharp decline in value. This process sounds simple, but the damage caused is devastating.

Looking at the major bubbles in history makes it clear. The Tulip Mania of the 1630s, when tulips were exotic foreign flowers, saw prices soar to absurd heights before suddenly collapsing, leaving wealthy merchants and aristocrats with heavy losses. The South Sea Bubble of 1720 saw the stock prices of the South Sea Company in Britain rise rapidly, triggering frenzied speculation; after the bubble burst, many people lost everything. These cases warn us of how risky speculation can be.

The railway mania of the 1840s was similar—speculative investments in railway stocks caused prices to rise rapidly, culminating in a crash in 1847, causing huge losses for investors. Then there was the famous stock market crash of 1929. On October 29, the Dow Jones Industrial Average fell nearly 25%, a day known as "Black Tuesday." From September 1929 to July 1932, the Dow lost nearly 89% of its value, triggering the Great Depression and having a profound impact on the global economy.

By the late 1990s, the dot-com bubble replayed the same story. Companies like eBay, Google, and Amazon experienced explosive growth, with internet stocks soaring in value, only to burst in 2000, causing massive financial losses.

Looking at these historical cases, the mechanism of bubble formation is quite similar—easy access to credit, low interest rates, and optimistic investor sentiment combine to inflate asset prices. Every bubble burst has a negative impact on the overall economy—reducing consumer spending, eroding confidence in the financial system. That’s why understanding the essence of economic bubbles is so important—it’s not just market volatility, but a force capable of changing the entire economic landscape.