Financial bubbles burst when current production cannot repay loans borrowed from the future.

Evidence

During the good times, the financiers’ rents rise geometrically – if not exponentially. Caught up in a gold-fever-like mentality, they lend burgeoning sums to capitalists – which they borrow from the future. … At some point the present cannot produce enough value to repay the future, the bubble bursts, and the psychological pendulum swings the opposite way, causing financiers to go on a credit strike. The result is a domino effect of collapsing corporate, FIRE (finance, insurance and real estate) and, often, public debt. — Yanis Varoufakis, Technofeudalism, 825

Categorization

• corroborated: 2 independent passages support this claim — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 825
• XREF: connects to: REBLL growth was built on foreign borrowing and structurally vulnerable to external shocks — Mark Blyth, Austerity: The History of a Dangerous…, 595; Finance’s profits came from three interlinked asset bubbles, not efficient markets — Mark Blyth, Austerity: The History of a Dangerous…, 625; Financial bubbles burst when future-productivity claims lose credibility — Max Haiven, Cultures of Financialization, 497 (+17 more)

Broader Connections

• A surge levy on capital flows can deflate speculatively-driven emerging-market bubbles. #expands (0.95) — Yanis Varoufakis, Technofeudalism, 731
• Financial crashes correct overextended finance relative to depressed industrial production #corroborates (0.95) — Alex Callinicos, Against Postmodernism, 530
• Financial fragility plus stagnant wages produce debt-driven growth regimes prone to crisis #expands (0.90) — Natascha van der Zwan, Making Sense of Financialization, 34
• The 2008 crash was rooted in decades of industrial decline papered over by debt #expands (0.90) — Andrew deWaard, Derivative Media, 79
• Imagining a future gain can destroy present wealth #exemplifies (0.90) — , A Year of World Stories, 5595
• Financial speculation externalizes its risks and costs onto the powerless #complicates (0.85) — Max Haiven, Cultures of Financialization, 332
• The present-focused economy of volatility has displaced deferred-gratification sacrifice. #qualifies (0.85) — Aris Komporozos-Athanasiou, Speculative Communities, 77
• Mainstream economic models cannot explain when bubbles start or stop #complicates (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 519
• Financial-sector growth from asset inflation may have exhausted its own model. #complicates (0.80) — Mark Blyth, Austerity, 629
• The Baltic austerity ‘success stories’ grew from unstable credit-bubble economies #complicates (0.75) — Mark Blyth, Austerity, 603
• Blame for the 2008 crisis was displaced from banks onto borrowers #complicates (0.75)
• Economics escaped crisis blame because the banking sector it protected escaped unscathed #complicates (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 555
• Central banks were trapped into a doom-loop of falling interest rates #complicates (0.75) — Yanis Varoufakis, Technofeudalism, 415
• The sovereign debt crisis is a transmuted and camouflaged banking crisis #complicates (0.70) — Mark Blyth, Austerity, 35
• Falling collateral values triggered Bear Stearns’ liquidity crisis. #complicates (0.70) — Mark Blyth, Austerity, 83