Why do financial "Bubbles" happen?

Question

OK, I can't believe that people and banks were so stupid in the past few years and caused this crazy housing crises. Now we are looking at a Oil bubble.

How much are the latest "Bubbles" going to cost me and the rest of the American people?

Answer 1

Bubbles are caused by greed and ignorance. People see stocks, real estate or oil going up and they want to get some of those gains and it just feeds on itself.

There is/was a large degree of dishonesty involved. People were granted loans that they couldn't afford. The broker pocketed the origination fee and those risky mortgages were packaged and sold to investors who thought they were buying safer investments.

There was no oversight. We are in a period of less regulation and oversight and this is a price we pay. Now, when we get burned, maybe there will be laws passed. And maybe some people will go to jail.