1. Bubbles are created by hoarders.
2. Hoarders create a FALSE illusion of excess demand, by buying something and storing it.
3. But ANYTHING stored is actually EXCESS SUPPLY (not true demand).
4. Producers react to the hoarding by INCREASING production capabilities and output
5. The hoarders help temporarily drive the price higher and those higher prices KILL true demand because the real users of the commodity are forced to make cuts, due to high prices.
6. So with FALLING real DEMAND, and with RISING SUPPLIES, the massive oversupply continues to build up, while prices are pushed to a peak.. But with excess supplies, prices top out and start to crash.
7. Falling prices scare speculators away and the massive oversupply helps to keep pushing prices lower. The lower prices go, the more it frightens speculators and many start to dump their hoards FURTHER ADDING TO THE MASSIVE OVERSUPPLY and further crashing the prices.
8. As prices continue dropping, the commodity gets a very bad reputation as a wealth destroyer and that bad reputation completely kills the hoarding cycle and prices drop VERY steeply.
The real estate bubble was created by folks buying and storing unused real estate (many folks held 2, 3, 4, and more houses sitting empty and unused). When the bubble popped, prices fell to 2001 levels.
When the rhodium (precious metal) bubble failed, prices returned to 2001 levels.
Silver was $4 in 2001
Well spoken words of wisdom. Of particular interest to me is #3 "But ANYTHING stored is actually EXCESS SUPPLY (not true demand)." Think about what would happen during a real crisis. Everyone tries to exchange silver for dollars so they can buy food. Food becomes scarce and you can't eat silver. It's like in the Titanic movie where the guy tries to bribe a ship hand with money for a seat on the lifeboat. At that point, there is no value.
That's pretty funny.....and unintelligent. It's the dollar that would have no value, not PM's. In a "real" crisis, people would be burning greenbacks to stay warm and those who had silver would be the ones with the food.
Bubbles are created by to much printing!
Also investment is demand just like industrial use as even they hoard it for future use!
Now you 2 go get a room after the short bus drops you off from skool!
Cause you 2 are SMRT!