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How does virtual wealth swell the market bubble

relative to the real economy and material wealth, the development of virtual economy makes virtual wealth have the tendency of self maintenance, self service and self expansion under specific conditions.

, for example, bank issued bank notes no longer have the same amount of gold reserves as they are under the gold standard. The bank institutions that absorb deposits have the function of creating bank credit, so the size of fictitious capital can exceed the bank’s savings greatly.

, there’s a lot like that. For example, commodity spot and forward contracts require standardized contract transactions to provide liquidity and price discovery and hedging mechanisms, and commodity futures and commodity options meet the needs of traders. The risks included in stock trading also need the mechanism of price discovery and transfer risk objectively. Stock index futures and options products emerge as the times require. Financial institutions to provide long-term mortgage loans, business will face a lack of liquidity and funding maturity mismatch problem, they use the means of securitization, the mortgage-backed securities were sold to investment banks, this problem will be smoothly done or easily solved. Investment banks on this basis further design a series of innovative products or derivatives, and other insurance institutions believe that the value of investment. Under good psychological expectations, the whole chain seems to be perfect. Product innovation and investment portfolios with high leverage have inflated the size of virtual wealth.

however, once the underlying product of financial innovation has problems, people’s economic expectations will reverse. Excessive risks when product innovation regulatory loopholes exposed, virtual Fortune Tower a moment may touch the sky, a bubble in Pyramid.

in the best case, the financial turmoil may also stop in the credit crisis, try to restore confidence, you can receive curative effect. Now, the international capital injection in the early stages of the rescue action, that is the purpose. In the case of poor, it may be caused by a financial crisis, shrinking credit crisis is only part of the picture, people not only confidence damaged, social economic system especially the trust mechanism of virtual economy in the erosion and destruction. In this case, restoring confidence and rebuilding trust will be time-consuming and laborious. To restructure financial institutions and strengthen effective supervision is the really effective way to solve them. With the expansion of the financial turmoil in Wall Street, the United States has now taken this step. Of course, what you don’t want to see is that the storm has evolved into an economic crisis that affects all the real sectors. As to whether the future situation will develop to this stage, it remains to be further observed.

occurs when the financial crisis, people will inevitably have a virtual wealth value and usefulness of the phobia, the correct understanding of virtual wealth in modern economic system status, necessity and limitations, it is necessary to.

virtual economic system belongs to the transaction department of the whole economic system, and performs its own functions with the production department. Transaction >

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