Bubble Formation And Bubble Bursting: A Flowchart So Simple Even An Economist Can Get It

Since it is now quite clear that despite calling for even endless-er QE, the uberdovish Chicago Fed, and by implication the entire FOMC, is still clueless about the two most critical processes of modern fiat-based economics, namely bubble formation, and its counterpart, bubble bursting, we decided to give them a helping hand, and to explain just how these two fundamental events occur, with flow charts so simple, even an Economics PhD can get it.

Bubble Formation: start at the bottom left...

Bubble Bursting: ...and end with a 'debt crisis' and a 'rush for the exits'

Rinse and Repeat - Simple. QED

Source: Oliver Wyman