Only after the speculative collapse does the truth emerge. The Internet is a classic example on both counts. Bubbles do not occur in recessions, although they often cause them. It thus becomes extremely volatile. All bubbles are fuelled with huge expansions of credit, as individuals and companies borrow to invest.
All bubbles burst, with predictably dire consequences for many participants.
In the Great Crash, the effects on the real economy were instantaneous and catastrophic as production collapsed in a credit crunch. It was 26 years before the Dow regained its 1929 high. Conventional economics ties itself into knots over bubbles. A less theological tendency says that while markets get it right most of the time, bubbles can arise in the interstices where rationality is less than complete. At the other end of the spectrum, some observers put the phenomenon down to greed and the herd instinct.