Feature

Our eternal bubble economy

“Irrational exuberance” is back.

Paul B. FarrellMarketWatch.com

“Irrational exuberance” is back, said Paul B. Farrell. Yale University economist Robert Shiller, who used former Fed Chairman Alan Greenspan’s famous phrase as the title of his best-selling book on the 1990s dot-com boom, says we’re at it again—and that we may be doomed to repeat our mistakes forever. Who could argue otherwise? Once again, we see a “collective insanity sweeping through millions of investors searching for a ‘new, new normal.’” We seem to never learn to recognize a bubble until it’s too late. Back in 1999, even “your barber’s stock tips” seemed brilliant. Yet after that bubble burst at a collective cost of $8 trillion, we sailed blithely into the next one: Despite the warnings from great minds like Shiller that the explosive rise in housing prices in the mid-2000s was setting us up for an epic fall, “the bulls continued their noisy climb up, up, up the wall of worry.” And so it is again today. The long bull rally that started in March 2009 might last a while longer, or “just impulsively terminate itself without warning tomorrow.” Either way, I’m afraid “we’re moving headlong into the third shocker of the 21st century.”

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