But a slow exit risks creating a credit and asset bubble as large as the previous one, if not larger.

On one hand, policy must fuel asset bubbles to keep the economy growing.

But the reality is that credit and asset equity bubbles are likely to form in the next two years, owing to loose US monetary policy.

The popping of such an asset bubble is what happened in Japan 10 years ago, an event from which that country has not yet recovered.

They made the bubble burst.

It's a pipe dream.

Until recently, the US asset price bubble first in the stock market, then in real estate masked the underlying depreciation of American enterprises. But the bubble itself resulted from the same management pathologies as those afflicting the real economy.

For example, they try to squeeze as much as possible out of land sales, thereby pushing up housing prices and helping to inflate asset bubbles.

Until recently, the US asset price bubble first in the stock market, then in real estate masked the underlying depreciation of American enterprises.

A bubble forms when the contagion rate goes up for ideas that support a bubble.

Will the Bond Bubble Burst?

Twist the first yellow bubble.

The bubble burst in the air.

The important question now is whether today s high asset prices are the result of some such fundamental development, or whether bubbles have formed.

The Gold Bubble and the Gold Bugs

The Great Emerging Market Bubble

Twist the first nine inch bubble.

Twist the second nine inch bubble.

Twist the third nine inch bubble.

I have a steel bladder.

I have a weak bladder.

Life is like a soap bubble.

So, split the last pink bubble in the middle and force the 5th bubble to the very end of the balloon.

But the bubble was not confined to the United States.

The U.S. Economy Is it the Next Bubble to Burst?

The bigger the bubble, the greater the collapse.

Maybe the word bubble is used too carelessly.

By any traditional definition, there is a bubble.

Twist the first yellow bubble of the second balloon.

Twist the 1st soft one inch bubble.

Twist the 2nd purple ten inch bubble.

Split the last purple bubble...uh...in the middle.

Asset recovery

That bubble has burst.

The Internet bubble was unusual in this regard.

That's the dot com bubble. This is the Lehman Brothers doorstep there.

It was just a bubble, we learned.

Twist the 1st soft one inch pink bubble.

I am going to make it just about ten inches.

So, twist the 2nd pink...uh...ten inch bubble.

Twist the 3rd soft two inch pink bubble.

Twist the 3rd soft two inch purple bubble.

For example, falling home prices put more families in negative equity mortgages worth more than the home.

Another downside risk is that the dollar funded carry trade may unravel, crashing the global asset bubble that it, together with the wave of monetary liquidity, has caused. And, since the carry trade and the wave of liquidity are causing a global asset bubble, some of gold s recent rise is also bubble driven, with herding behavior and momentum trading by investors pushing gold higher and higher.

Another downside risk is that the dollar funded carry trade may unravel, crashing the global asset bubble that it, together with the wave of monetary liquidity, has caused.