The speculative financial bubble involves bidding up the price of an asset far beyond its underlying value.
The famous financial bubbles occurred in seventeenth-century Holland when it was found that certain tulip bulbs, when attacked by a particular virus, produced flowers of brilliantly variegated colors. These bulbs came to be highly valued by collectors. Then speculators began acquiring them, pushing prices higher. Others came in to profit from the bonanza of prices that seemed to rise without limit.
Soon everyone, from nobles to chimney sweeps, was in on the action, bidding up the price of a single bulb of a particularly prized variety to the equivalent of $60,000 in current dollars. The inevitable bursting of the bubble came in 1637.
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