What is often the result of unchecked financial bubbles?

Unchecked financial bubbles typically lead to market corrections. A financial bubble occurs when the prices of assets rise to levels that are unsustainable, driven by excessive investor optimism and speculation rather than fundamental values. When the bubble bursts, it often results in a rapid decline in asset prices, which can lead to widespread financial losses and a reassessment of investment values across the market.

This process of market correction aims to realign prices closer to their intrinsic values after a period of inflated valuations. It serves as a reality check for investors and can cause significant volatility in the financial markets as buyers and sellers react to the sudden shift in asset valuations. The aftermath can lead to economic instability, as the effects ripple through various sectors, affecting consumer confidence and spending.

In contrast, increased investor confidence, instant wealth for all investors, and improved economic stability are typically not seen during or after the bursting of a financial bubble. Instead, the predominant outcome is a necessary market adjustment, which reflects the risks associated with speculative investing.