Money’s the Illusion

Every financial bubble follows a familiar pattern: Prices climb, speculation intensifies, fear of missing out (FOMO) drives irrational exuberance, and then—almost inevitably—the crash comes.  

But why do markets truly collapse? Some experts offer complex theories, while others point to historical cycles. Yet, the simpler truth behind these crashes is often overlooked.  

The Theories Behind Market Collapses

For centuries, economists have tried to explain why financial markets fall apart.  

The Real Estate Cycle Hypothesis

Renowned economist Phil Anderson argues that real estate operates on an 18.6-year cycle, where 14 years of rapid growth give way to a 4-year downturn—an inevitable, mathematically driven pattern tied to land speculation. According to his model, the next peak should occur in 2026, followed by a significant correction.  

Monetary Policy & Interest Rates

Others blame central banks—arguing that low interest rates and excessive liquidity create unsustainable bubbles. When borrowing costs rise, the artificial growth collapses under its own weight.  

Geopolitical & Macroeconomic Factors

Wars, supply chain disruptions, and financial instability play their role—causing panic sell-offs and sharp market contractions.  

Psychological Overexuberance & The FOMO Effect

Perhaps the most universal reason for market crashes? Human behavior. When prices soar, people rush to invest, fearing they'll miss out. But as affordability breaks, reality sets in—panic spreads, and everyone scrambles to escape at the same time, causing the collapse.  

Where This Hits Hardest: Real Estate’s Deceptive Boom

If there’s one market where this cycle plays out over and over again, it’s real estate. People believe property prices will rise indefinitely, but in reality, the mechanics behind those price increases aren’t what they seem.  

Real estate is often viewed as an ever-appreciating asset, but that assumption is deeply flawed.  

Unless a property undergoes fundamental changes—new infrastructure, higher demand, or gentrification—its actual value does not increase. What’s really happening? The currency used to buy it is losing value.  

For over a decade, inflation has chipped away at the dollar’s purchasing power. The result? Property prices appear to be rising, when in reality, the cost of money is declining—creating a dangerous illusion that fuels speculative buying.  

This false perception is one of the key reasons markets crash—not because of rigid cycles or economic formulas, but because people overbid on an asset that hasn’t fundamentally changed, only realizing the error once affordability collapses.  

Final Thought

Markets crash when we collectively push prices beyond sustainability, ignoring reality until the illusion collapses.  

Real estate remains vital, but the smartest investors recognize that price inflation doesn’t equal true value growth—sometimes, it’s just a sign of a weaker dollar.  

The lesson? Look past the hype, question assumptions, and recognize the psychological forces at play. The best investors aren't watching cycles or charts—they're watching human behavior.