Short answers, pulled from the story.
An economic bubble is a period when asset prices greatly exceed the value that underlying fundamentals justify. Bubbles typically form from a combination of excess liquidity in financial markets, changed investor psychology, and self-reinforcing herd behavior, and are often identified with certainty only after they have already burst.
The term originated in the British South Sea Bubble of 1711 to 1720. It initially referred to the speculative companies themselves and their inflated stock, using the metaphor of a soap bubble to convey that prices were expanded on nothing but air and vulnerable to sudden collapse.
An equity bubble involves tangible assets and real innovation, such as the dot-com bubble or Tulip Mania. A debt bubble is built on credit-based investments with little backing in real assets, and tends to produce more severe economic consequences, as seen when the 2000s United States housing bubble caused the Great Recession.
Economist Charles P. Kindleberger identified five stages: displacement, in which an external shock creates new profit opportunities; boom, with rising prices and speculative buying; euphoria, when speculation widens and rational valuation is set aside; financial distress, when prices plateau and selling begins; and revulsion, when prices plummet and panic spreads.
George Soros, drawing on ideas from philosopher Karl Popper, first described reflexivity publicly in his 1987 book The Alchemy of Finance. The theory holds that prices actively shape economic fundamentals rather than merely reflecting them, creating self-reinforcing boom and bust cycles that push markets toward disequilibrium rather than equilibrium.
Warning signs include elevated debt levels used to purchase assets, unusually high asset prices relative to income or earnings, lending to borrowers with limited ability to repay, widespread rationalization that prices will only rise, and heavy media coverage of the asset class. These indicators are more visible during the boom and euphoria stages and are confirmed with certainty only in hindsight.