Bubbles, pyramids and outbreaks: why speculative manias behave like epidemics
Prices can sometimes become unjustifiably high due to speculation, exemplified by the “greater fool” theory. Pyramid schemes highlight this unsustainability, requiring constant recruitment. Financial bubbles follow identifiable phases—stealth, awareness, mania, and decline. Assessing the potential investor population’s size is crucial, as rapid growth relies on susceptible individuals, which eventually diminishes.
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