Nick Fountain

But the basic idea is should the government lean against, like push back against a suspected bubble and try to shrink it?

Or should the government just stand by and get ready to clean up after a bubble pops?

That is until 2000, when the dot-com bubble burst.

All these new internet companies went bankrupt.

The entire NASDAQ index plunged 78%.

And that threw the whole U.S.

economy into recession.

Several years later, there was another bubble in the U.S.

housing market.

The price of houses in the U.S.

kept going up and up and up to ridiculous levels.

And when that bubble popped, well,

You know what happened next.

It kind of triggered the global financial crisis.

Nowadays, Gotti says, what we really need to understand is just how bad can bubbles be for the economy?

And macroeconomists think there are basically two ways bubbles can hurt the economy.

We're going to run through them right now.

That's what happened during the housing bubble.

People were taking out mortgages from the bank to buy these overpriced homes.

So when housing prices collapsed, it wasn't just the homeowners that got hurt.