To understand why, consider a share-price bubble.
This may prove to be a Trojan horse.Less happily, if the public's enthusiasm for share trading grows, America's share-price bubble may get even more inflated.
Thus Mr Roubini's diagnosis of Asia does apply to China.If China's share-price bubble burst, the economic consequences in China and among its neighbours would probably be mild, since Chinese share-ownership is relatively low.
On the other hand, Australia, unlike America at the end of the 1990s, has a house-price bubble, which could be much more dangerous than a share-price bubble if it bursts.
And by holding rates steady, the Fed continues to fuel a share-price bubble that if (when?) it bursts will damage the whole economy.America's economic performance has been undeniably impressive under Mr Greenspan's care.
These weaknesses, say economists such as Robert Shiller, whose improbable bestseller, "Irrational Exuberance" (Princeton, 2000), foresaw the bursting of America's share-price bubble, can lead them to pay more for shares than any rational investor would.Time for good behaviourDo these findings mean that classical economics is useless?
There are two examples of central banks acting to burst share-price bubbles.
Their most common objection is that share-price bubbles or exchange-rate misalignments are difficult to identify.
Historically, however, many price bubbles have gone hand-in-hand with borrowing binges and rising leverage, including America's share price and real estate bubbles in the 1920s.
Analysts concluded that Elektra might drop out of the index altogether: in two days Elektra's value fell by almost $7 billion.With Elektra's share price restored to pre-bubble levels, it should have been back to business as usual.
But like many other telecommunications suppliers, its share price plunged after the Internet bubble burst.
