Are We Heading for Bubble Trouble?

With the Dow topping fifteen thousand and long lines forming down my block to inspect a two-bedroom apartment that is going for the shockingly low price of under a million dollars, it’s hard not to think of the “b” word: bubble. Whatever else, the Fed’s policy of “quantitative easing” may have accomplished, or not accomplished, it’s certainly given a bit more juice to the Brooklyn real-estate boom.

Should we be worried? In a typically feisty column today, Paul Krugman dismisses those who are concerned as “babbling barons of bubbleism.” It’s a nice piece of alliteration, and I’m largely with Krugman on the specifics, but l think he goes a bit far. On the past two occasions we dismissed talk of bubbles, we ended up with the dot-com bubble of 1998-2000, which was epic but didn’t have too many lasting effects, and the housing bubble of 2003-2007, which was simply disastrous.

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