When an asset bubble bursts, there is less collateral damage than when a credit-driven bubble bursts; yet, macroeconomic coverage failure happens when a credit-driven bubble bursts in a financial system.
Once the bubble bursts, the price decline leads to the collapse of unsustainable investment schemes, particularly speculative and/or Ponzi investments, but not exclusively. This confidence crisis among investors and consumers may produce a financial panic and/or financial crisis.
Investors keep driving up the price of an asset during a bubble past its true, long-term worth. The bubble eventually "bursts" when prices drop and demand declines. The results are frequently decreased consumer and business spending as well as a potential slowdown in the economy.
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When an asset bubble bursts, there is less collateral damage than when a credit-driven bubble bursts; yet, macroeconomic coverage failure happens when a credit-driven bubble bursts in a financial system.
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