Anatomy of a Bubble

1. Investing (in any asset class) goes mainstream and ordinary people think that they can get rich effortlessly

2. This can go on as long as everybody has the same disillusion, and supply of the particular asset is smaller than demand

3. Bubble bursts when supply gets bigger than demand and forces prices to decline, causing the demand go even lower, and eventually turning into a loop

Central banks are in the position to create bubbles, because their credit to banks and governments can be cheaper than if commercial banks lent money to each other. It is a centrally controlled mechanism for agreeing prices for credit. 

Artificially cheap credit --> less risk for banks to lend money to companies and individuals --> companies and individuals invest more --> go back to nr. 1