Do bubbles exist in the current fine wine market?

It is not important whether drastic increases in prices equal bubbles in the market; economic bubbles are a widespread market phenomenon which, provided they are kept under reasonable control, are actually favorable for a thriving market. The question is whether or not the fine wine market has expanded exceedingly, to the point of seriously breaking away from real capital and the developmental needs of industry, thereby turning into a bubble economy.

Two primary factors for the formation of economic bubbles:

1. A relaxed macro environment opens up a source of funds for speculative activities. Since the credit crunch in 2008, governments around the world have reduced interest rates to stimulate economic growth, which significantly relaxed the money market. Enormous funds really did exist. China has increased interest rates from 2.25% to 6.56% since October 2010 in order to tighten its reins on the money market. The Chinese government is very determined in this regard.

2. A restraint mechanism to tackle the formation and development of a bubble economy is lacking in society. Restraint mechanisms vary between governments across the globe.  On a macro level, the restraint mechanism in the Chinese economy has to be far reaching. Unlike in the stock market, no restraint mechanism exists in the fine wine market.

As the Chinese government vigorously tightened up its monetary policy and its control of the Chinese economy on a macro level, the ‘fine wine bubble’ theory is not indeed very convincing. It is not important whether we are experiencing a bubble; one should be a rational buyer at all times. The most important thing is to enjoy the wines that you like, and buy what you need.