FrameworkCrises and market historyMarketsMacro and rates
A bubble needs marketability, money and credit, and speculation together
William Quinn, John D. Turner · Boom and Bust
The idea
Quinn and Turner's data-led treatment of bubbles adds a precondition test to Kindleberger's sequence. They frame it as a fire triangle. Fuel is marketability: the asset has to be easy to buy and sell, which is why new exchanges, new instruments and new ways of dividing ownership so often precede a bubble. Oxygen is money and credit: cheap funding with which to buy. Heat is speculation: a population willing to buy for resale rather than for yield. Take any one away and the fire does not start. The framing is genuinely usable in an interview answer because each leg can be checked against data.
Check all three legs, marketability, cheap money and a population buying for resale, before calling something a bubble.
When it works
Answering whether a current market is a bubble, or explaining why some overvalued assets never become one.
When it may fail
The triangle says when a bubble can form, not when it will burst, and some of the largest losses in history came from assets that were never marketable enough to count.
How to use it
For the asset in question, name the recent change in marketability, the source of the credit, and the evidence that buyers expect to resell rather than hold. If one leg is missing, say which and why that changes the answer.
Where it came from
Book Boom and Bust · William Quinn and John D. Turner
What the source says. A newer and more data-led treatment of bubbles whose fire triangle framing of fuel, oxygen and heat is genuinely usable in an interview answer.
Connected ideas
Worth knowing first
Every bubble runs displacement, boom, euphoria, distress, revulsionAsk where a market is in the sequence rather than whether it is a bubble; the stages are more recognisable than the verdict.
Concepts
Put it to work on L3VLUP
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