Things go up in a market because the fundamentals are good. That's not yet a bubble - it's based on the reality of the fundamentals. But a bunch of people see the market go up and decide to invest in it, not because the fundamentals look good, but because they want to make money and that market is going up. That makes the market go up more. So more people invest in it, because it's going up, and there's fear of missing out. Now it's starting to become a bubble, but it's not yet a dangerous one. If it breaks, people will lose money, but it won't destroy the economy.

The next step comes when people borrow money to invest in the market, because it's going up, and they can make more money that way. So now the market really starts to go up, because there's so much money pouring in. The fundamentals are completely out of view here - they're not even a distant reflection in the rear-view mirror. Everyone's making money, and nobody wants to get out, but everyone kind of has this nagging sense that the party's going to end sometime.

Eventually, the banks kind of wise up (way too late) and start limiting the amount of money they're going to lend for purposes of buying assets in this market. Then the price stops going up. Then everyone rushes for the exits, because they don't want to lose money, especially since most of the money is borrowed. But everybody can't be one of the first ones out the exit, and so a bunch of people lose money.

Borrowed money. Money they can't pay back.

Now the banks are in trouble, because they've made a bunch of loans that people can't pay back. That's how a bubble can hurt the larger economy.