Are Economic Crises Real or Just a Cycle of Self-Inflated Markets?

Economic crises often seem sudden, painful, and catastrophic, leaving behind a wake of confusion and hardship. We hear about "booms" followed by "busts," and these terms get thrown around in the media as though they're part of some natural economic rhythm. But is that really the case? Are economic crises actual events caused by fundamental issues in the economy, or are they simply periodic corrections of self-inflated markets — inevitable declines that follow irrational spending and speculation? And most importantly, is it all a form of manipulation, a convenient narrative for those who lost their investments to digest, blaming it on a “god-driven” event beyond anyone’s control?

The Rise and Fall of Booms

Throughout history, markets have experienced periods of rapid expansion followed by sharp contractions. These "booms and busts" have become synonymous with economic crises, yet the patterns behind them are often driven by human behavior rather than pure economic fundamentals. One of the most famous examples is the "Tulip Mania" of the 17th century, where tulip bulbs in the Netherlands were traded at exorbitant prices before the market collapsed, leaving many bankrupt. This classic example of a bubble shows how market euphoria, speculation, and herd behavior can inflate the value of assets far beyond their actual worth, only for reality to eventually catch up and burst the bubble.

Fast forward to the modern era, and we see similar patterns. The "Dot-com Bubble" of the late 1990s was characterized by an overvaluation of internet-based companies, many of which had no viable business models. Investors, fueled by a fear of missing out (FOMO), poured money into startups that were often nothing more than ideas, driving stock prices to unsustainable levels. When the bubble burst in 2000, over $5 trillion in market value was wiped out. This boom and bust cycle, like those before it, was a product of speculation, overconfidence, and the psychological dynamics of the market, not an external, god-driven event.

Manipulation or Normalization?

To understand whether economic crises are real or a form of manipulation, it’s crucial to differentiate between two types of crises: those caused by real economic dislocations (e.g., oil price shocks, war, or pandemics) and those that result from "self-inflated markets" correcting themselves.

According to economist Hyman Minsky, financial markets are inherently unstable because they are driven by cycles of euphoria and panic. During a boom, investors take on excessive risks, assuming the good times will continue indefinitely. As more and more capital chases after speculative gains, the system becomes overleveraged. When reality reasserts itself — when the bubble bursts — the resulting downturn feels like a crisis. However, in many cases, what we are witnessing is simply the "natural rebalancing" of an overextended system. In fact, some economists argue that periodic corrections are necessary to bring markets back to their fundamental values.

Take the "2008 Financial Crisis" as a modern case study. The global housing market had been inflated by subprime mortgage lending and the repackaging of risky loans into financial products that were sold worldwide. When the housing bubble burst, it triggered a global financial meltdown. In hindsight, it’s easy to see how the crisis was a product of human error, greed, and a lack of regulatory oversight. Was it manipulation? Many would argue yes, as financial institutions knowingly engaged in risky practices that enriched a few at the expense of many. Yet, others see it as the inevitable outcome of an unsustainable boom — a necessary, albeit painful, correction.

God-Driven Crises?

For those who lose their life savings or see their investments evaporate overnight, the idea that economic crises are part of a larger, uncontrollable cycle can be a form of solace. It is easier, perhaps, to believe that a crisis was "god-driven" — an event beyond human control, a kind of financial act of nature. This belief can help cushion the emotional blow for individuals who lost everything in a crash. They might think, "It wasn’t my fault. It was a systemic event that no one could have prevented."

But is this narrative accurate, or is it another form of manipulation? In a way, blaming external forces removes accountability from the actors who drive these market fluctuations. "Hedge fund managers, investment banks, and even governments" play a role in both the inflation of markets and their subsequent collapse. Financial crises are rarely acts of nature; rather, they are "human-made events" that arise from decisions made in boardrooms, trading floors, and government offices.

Consider this: after the 2008 crisis, "80% of the gains from the economic recovery went to the top 1%" of the population, according to data from the "Economic Policy Institute". This stark inequality suggests that those with capital and influence were able to protect themselves and even thrive while the middle and working classes bore the brunt of the downturn. Such disparities make it difficult to view economic crises as random, god-driven events. Instead, they are deeply interconnected with the structures of power, wealth, and influence.

Are Economic Crises Manipulations?

So, are economic crises real or just manipulated corrections? The answer lies somewhere in between. On the one hand, crises are very real for the people who lose jobs, homes, and savings. They are tangible and painful. On the other hand, the systemic causes of these crises — speculation, greed, and lack of regulation — suggest that they are not purely natural events but rather "predictable outcomes" of certain behaviors and policies. In this sense, they can be seen as manipulated — though perhaps not in the sinister, deliberate way one might imagine, but as the unintended consequences of unchecked financial excess.
To return to the initial question: Is this easier for the poor investor to digest if we frame it as a “god-driven” event? Absolutely. It provides a narrative that allows individuals to move past feelings of personal failure and hopelessness. But it is crucial that we recognize the real, human-driven mechanisms behind these crises, lest we continue to repeat the same mistakes.

Cycles of Boom, Bust, and Reality

Economic crises, whether framed as market corrections or full-blown catastrophes, are part of the cyclical nature of financial systems. Yet, they are not inevitable in the sense that we have no control over them. Market bubbles form because of human actions — speculation, greed, and a desire for short-term gains. When these bubbles burst, it can be easy to look for something or someone to blame, whether it’s external forces, bad luck, or even divine intervention.
However, by understanding the root causes of these crises — both the psychological and structural elements — we can begin to navigate them more wisely. Whether for the poor investor or the seasoned hedge fund manager, economic downturns will always be painful, but they don’t have to be seen as random, uncontrollable events. They are part of a "larger, often predictable, financial ecosystem", and while they may feel "god-driven" at times, they are far from beyond our understanding or influence.
In the end, whether an economic crisis is a natural periodic normalization or a result of deliberate manipulation depends on where you stand — but understanding the forces at play might just make the next boom a little less dizzying.