Capitalism is an economic system that is based on private ownership of the means of production and the creation of goods or services for profit in a competitive market.

While a pyramid scheme is an investment scheme that promises to offer investors incredibly high, and often risk-free returns.

The scheme works by recruiting new investors to pay off earlier investors, rather than by generating profits through legitimate business activities.

An economic bubble, on the other hand, is a situation in which people trade in products or assets for amounts significantly larger than their intrinsic values. There is no fraud involved in an economic bubble, but it can lead to a sudden and dramatic collapse in prices when the bubble bursts.

Dear Sixolisiwe Dabula, I will try to explain this issue not only from the perspective of an economist, but also from the perspective of an economic historian of the communist countries of the Soviet camp. Well, capitalism is an economic system based on private property and a market mechanism in which freely concluded market transactions between entities should apply. That is, as my previous speaker, Dr. Chuck A Arize, described it. However, financial pyramids and speculative bubbles are financial phenomena accompanying the capitalist system during its cyclical development. What I mean here is the business cycles that every capitalist market economy, i.e. one with private business seeking profits and increasing wealth, is subject to. I won't be groundbreaking if I say that in every market economy there are greedy and cunning people who are willing to take big risks to gain wealth. Some businessmen and ordinary people are so greedy that they violate ethical principles and break the law in order to get rich as quickly as possible, legally or illegally. An excellent tool for seeking easy enrichment are financial pyramids, i.e. certain "financial vehicles" in which only the founders and the first people to join are able to earn a lot, while the last ones to join such pyramids are most often victims of fraud or financial collapse of a given pyramid, e.g. . chain letters, which appear in different versions every now and then in different countries, and interestingly enough, in countries with a non-market economy, i.e. in the countries of the communist camp in Eastern Europe, in the 1980s we also had such financial pyramids, despite the official legal ban on them. creation and severe sanctions for deriving income from gambling and non-bank financial activities without a state license. Therefore, greed and the desire for quick wealth are the plague of both the capitalist system and non-market, communist systems (only in these authoritarian systems one cannot write or say anything about it, because externally the communist party presented such countries as a paradise for the poor and disadvantaged in the world, to tempt as many naive nations as possible into state communism!!!) In communist countries in the 1980s, the state post office was used to create financial pyramids by sending money deposited and withdrawn via letters! Yes, the smart guys had such bold and simple ideas. Another method of fraud was collecting payments from people's homes for some Western, i.e. capitalized product, which, after a number of payments in installments, was to be brought by a given crook to a given naive citizen (supposedly a product purchased at a promotional price). These scammers disappeared with the collected payments and no one could find them. In turn, speculative bubbles have accompanied market play and trading on commodity and stock exchanges for centuries. Bubbles are the result of speculation in securities or commodities whose prices fluctuate over time from extremely undervalued to extremely overvalued. There have been many speculative bubbles in history, and one of the most famous is the tulip mania from the 17th century in the highly marketized Netherlands, which had a well-developed stock exchange in Antwerp at that time. Best regards Dariusz

@Chuck A Arize. If economic bubble is prices of products higher than the intrinsic values. How did it happen? Was it not promising of high future rewards from non valuable products like tulip (crisis) , 1920s stock market hype etc.

Pyramid scheme promise future rewards too which are not kept. The pyramid scheme takes money from Peter to pay Paul but doesn't make profit.

I would argue that economic bubble are caused by the banks that make debt promised to be paid in the future but doesn't make profit. Future (baby) Peter pays Paul.