Page 77 - 8th

외고2018-웹용.qxp_Layout 1 2018. 6. 23. 오후 3:06 페이지 77

Incheon
Zenith Foreign
the 8th Language
High School
In the rush to cash in on the Internet boom, many specula- raising prices to unsustainable levels, and then followed
tors disregarded traditional investment metrics, instead they by a precipitous decline in value leaving many specula-
subscribed to a business model that favored building brand tors with large financial losses and bankruptcy.
awareness and market share quickly, even if that required - Manic part of the bubble lasts about one to two years
offering services or products for discount prices or for free. where prices are rising at an ever-accelerated rate often
Moreover, low interest rates in 1998 helped drive up the doubling in value in a single year.
quantity of capital invested in dot-coms. Also, technologically - The rise is the most rapid just before collapse of the bub-
advanced infrastructure and the understanding of Internet ble.
enabled people in developed countries to easily get online. - The evaluation of the particular commodity in question
These factors, combined with the fortunes made by some becomes unreasonable near a bubble top such as tulip,
of the startup founders whose companies went public, fu- etc.
eled the exuberance. - People’s attention will generally gravitate to a commodity
Unfortunately, the dot-com bubble started to collapse in with rapidly rising prices with the largest participation oc-
1999. Companies started to proclaim its bankruptcy and by curring at the high point of the price.
2001 many dot coms were doomed to failure. The trillions - Guarantees that most speculators and investors will be
of dollars in market value lost during the crash of the stock left holding the bag as the price goes into a quick rever-
market between 2000 and 2002, coupled with the financial sal when the bubble finally bursts and heads back to a
damage inflicted by the 9.11 terrorist attacks and caused realistic level.
huge layoffs in the technology field. Many still argue that the
dotcom boom and bust was a case of too much too fast. The Encyclopedia Britannica defines the economic jargon
However, the “new economy” defined by the Internet boom as ‘engagement in business transactions involving consid-
seemed to show a successful achievement compared to erable risk but offering the chance of large gains, especially
burst after other financial bubbles. Among the estimated trading in commodities, stocks, and etc., in the hope of profit
48% of the dot-com companies that made their way through from changes in the market price.’ This coincides with the
now are current Internet giants Amazon, E-bay and Google. economic term ‘Investments’ in forgoing consumption in
order to reap greater value. However, while investments rely
on substantially sturdier economic items, the act of specu-
lation often takes unnaturally high risks on irrelevant items.
In the case of speculation, an arbitrary item is selected (often
in accordance to the recent fad of the public), and a great
amount of financial value is applied to the said item, and this
unnatural phenomenon upsets the established financial
order of goods. Thus, insignificant items sway the entire
market, and the common people squander their fortune on
these items, causing the whole market to rely heavily on a
limited order of the most-wanted items. This overall phe-
nomenon is called the ‘speculative bubble.’ bound to burst
any moment.

6. Characteristics of Economic Bubble from Five Prece- Another distinctive feature of speculation is the incessant
dents fluctuation of value in a relatively short amount of time.
- Bubbles are not often recognized when they are occur- Steady items in the market are a tacit promise in order to
ring and then failing to act until after they have burst. maintain the prices of other goods and items. Each item
- Each of these bubbles first produced large gains for price corresponds to other financial items, and speculation
early investors, followed by a large public participation causes the symmetrical balance of the items to fall apart.

77