There is a great of writing and talk about the current economic situation, which is related to a housing bubble. "Bubble" sounds like fun and games but this sort of bubble is nasty, deadly, even. The most famous bubble I ever heard about is the Dutch tulip mania. There was a time in 1670 when the Dutch went bonkers over tulips. Of course, they and lots of others are always impressed by a lovely field of gorgeous flowers announcing spring and beauty and liveliness. But this time, interest got way out of hand. The article linked above says that at the height of the situation, a single bulb sold for ten times the annual income of a skilled craftsman!
No flower bulb is likely to be worth such a price. But the difficulty with worth is that it depends on a market. If someone is willing to pay $10,000 for an old note I wrote to my wife, then the note is worth $10,000. That standard is dangerously unstable, though. As the public television show, Road Show, shows, a person might be surprised to find a high value placed on some object in his possession when he didn't even know anyone would want it all all. You have an old coin I hear is worth lots of money but you haven't heard that. I buy it from you, expecting to re-sell at a fabulous price but then, the bottom falls out of my market and no one wants the coin at any price. That is the dangerous instability. Like the Ponzi scheme, where I send off money to someone but wait expectantly for many others to send money to me, I can spend a big amount and get nothing in return. This last link notes pointedly that such schemes can also pay off if the government bales out some or all of the participants!
The Dutch tulip bubble is discussed by the 1847 author, Charles Mackay, in "Extradinary Popular Delusions and the Madness of Crowds" and in other places, such as Michale Pollan's The Ominvore's Dilemma. The Dutch tulip mania article linked above says that modern scholarship doubts the Mackay account. Maybe he wrote a little more dramatically than the facts support. The modern economist, John Kenneth Galbraith, also wrote about the Dutch tulip mania and other financial sinkholes.
Here is a fictional account of a bubble and its operation that struck me as fun to read and both memorable and instructive. It is about losing sight of the actual worth of a goat and getting caught up in markets and speculation.
