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One of the reasons central bankers were reluctant to tackle high asset prices was that their only tool was interest rates.
That in turn means the consequences of returning interest rates to "normal" levels will be all the greater in terms of lost confidence and bad debts.So we are trapped in a world of low interest rates and high asset prices.
It is also that the current combination of high asset prices, low interest rates and massive fiscal deficits is unsustainable.Interest rates will stay low only if growth remains slow.
First, if growth did not recover and surprise on the upside (in which case high asset prices would be justified), eventually slow growth would dominate the levitational effects of liquidity and force asset prices lower, in line with weaker economic fundamentals.
Dr Bernanke is not just unworried, he is delighted by them.In Britain, he comes to the view, a bit of a hobbyhorse in this blog, thathouse prices still seem dangerously high relative to disposable incomesThese high asset prices are also accompanied by high debt levels.
The market rebound was necessary to stabilise economies last year, but now there is a danger that bubbles are being created (see article).Forever blowing bubbles?Aside from high asset valuations, the two classic symptoms of a bubble are rapid growth in private-sector credit and an outbreak of public enthusiasm for particular assets.
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The same pattern was seen among the high assets-group (Table 3).
Meanwhile, in our study, juvenile voles, that should have high assets to protect, did not have lower boldness or higher activity scores compared to adult animals with expected lower future assets.
But initial conditions already include too much debt, too-high asset prices (property) and too much risk-taking.
"They would rather struggle with the problem of higher asset values than negative equity".
This confidence is most likely in a world of rapid economic growth and higher asset prices.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com