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Chapter 3. Causing the Bubble > Other Bubbles in History

Other Bubbles in History

As suggested earlier, the Internet stock mania was a financial bubble. A bubble is formally defined as an exceptionally rapid rise in prices in which a commodity's price far outstrips what it is worth to anyone except a speculator.

Bubbles are usually caused by a shift in a technological paradigm, so it's easy to make a story about fantastic opportunities for investors who have no ready frame of reference to place the story in context. Bubbles are funded by easy credit so that in a modern economy, a central bank is involved one way or another.


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