A managerial analysis of historic economic bubbles as basis for identifying future similarly economic losses
The devastating effects of past economic bubbles are well documented. It takes a long time for countries, companies and individuals affected by these events to recover. In the first chapter the background, the context of and causal factors to the study were discussed. The problem statement was given, and the research objectives and research methodology were discussed. The limitations of the study were stated, and an overview of the research design and layout of the following chapters was presented. In the second chapter, ten historic world economic bubbles, as well as three South African economic bubbles, were analysed to determine whether a life-cycle could be determined. It was found that they followed a similar life-cycle. During the literature review, a life-cycle for economic bubbles was found that had previously been determined by other economists. These two life-cycles were then compared and found to have similarities. By using the identified life-cycle and patterns, current economic situations were looked at to determine whether it would be possible to detect an economic bubble as it was developing and thus be able to manage its effects better. Two possible future bubbles were discussed and compared to the life-cycle of historic economic bubbles. These are Cryptocurrency and Global Debt, and they were found to have similarities to previous bubbles. In chapter three, interviews were used as part of a qualitative study to support the findings of the literature study. Twelve interviews were conducted during which each of the interviewees was asked the same twelve questions for this purpose. The information gathered from the interviews was loaded onto an MS Excel spreadsheet, and similarities in the answers were identified. The findings were then given in this study and discussed. In conclusion, this study found that it was possible to identify the circumstances in which economic bubbles can develop. These bubbles are caused by a market shift or opportunities caused by consumer speculation within a commodity - most probably a new technology or innovation, or political or economic stimulus that includes access to cheap credit or a combination of these. Ways were found to identify developing economic bubbles by determining whether these occurrences were following the life-cycle of an economic bubble. Possible preventative measures would include but are not limited to, transparency within a market with freely available up-to-date, reliable information, stable political and economic environments with disciplined monetary policies restricting access to cheap credit when necessary. Finally, a managerial framework was developed to assist with managing these economic bubbles. With this in mind, the research objectives of this study were achieved.