by Will Emprise

Created on: February 26, 2008

A real estate bubble is not unlike any other type of bubble namely a stock market bubble. The idea of a bubble is that what it is constructed on his unstable and ready to fall apart at any moment. To understand the real estate bubble allow us to analyze what happens in a stock market bubble.

In the stock market when more people buy than sell, OR as to say when more dollars are used to buy than dollars are desired from selling, the stock market increases in value. Inversely, when more people desire dollars now than the promise of more dollars in the future OR when more dollars are sought now than more dollars in the future, the stock market goes down. A bubble is created when there is some sort of false observation that things are going to be great for a long time to come, and commonly this bubble is driven up by excessive optimism which blinds people's good judgment. For example a young investor who is usually prudent, but is caught up in the prospect that if he stays in just a little longer and the market increases a little more he'll reach most of his financial goals. In other words, he acts foolishly optimistic. Or if people feel that the current employment situation, the current business revenue growth will continue and good times are likely, they will keep their money in the market and continually increase the amount that they are willing invest it it.

This hope that times will continually be good attracts more and more people. Another aspect is the way that money is obtained to place money in the market. People may take money out on credit cards that advertise low interest rates and use the money in the stock market. These competitive day traders are one of the main major causes of a crash. A market that operates on a typical sense of reasonable investing will experience an upward thrust if money taken out on credit is placed into it, because typically credit card money is used in storefronts and drives up the profit margins of the companies themselves that there stock market prices. There are two ways then that one could, if in an all powerful position, drive up his own stock price. Will his customers to spend more for each item: more profit, higher stock price. OR. Convince his customers to use their credit cards to obtain cash to purchase more of his stock: more stock purchases, attracts other investors, drives up the stock price. Using credit cards to buy credit is almost always a bad idea, and artificially inflates the stock market.

But what motivates

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