Paul Krugman: Bernanke, Blower of Bubbles?

Bubbles can be bad for your financial health — and bad for the health of the economy, too. The dot-com bubble of the late 1990s left behind many vacant buildings and many more failed dreams. When the housing bubble of the next decade burst, the result was the greatest economic crisis since the 1930s — a crisis from which we have yet to emerge.

So when people talk about bubbles, you should listen carefully and evaluate their claims — not scornfully dismiss them, which was the way many self-proclaimed experts reacted to warnings about housing.

And there’s a lot of bubble talk out there right now. Much of it is about an alleged bond bubble that is
supposedly keeping bond prices unrealistically high and interest rates — which move in the opposite
direction from bond prices — unrealistically low. But the rising Dow has raised fears of a stock bubble, too.