[partiallypro]

The housing bubble lasted a long time, even when people in 2004 were sounding the alarm bells. It kept going. A bubble bursting doesn't mean everything is getting wiped out, and it's nothing to fear...just something to hedge against. It does hurt people, and that's unfortunate, but it has to happen. It might even put me out of a job, I hope not, but it's very possible.

Yet as much as it hurts, it has to, and will happen. Doesn't mean it will be as bad as 2008, but it's part of the business cycle. I don't think there's any denying that valuations have gotten way out of hand, especially in the private equity and VC world. But trying to call a top is just as hard as calling a bottom, if it were easy policy decisions would be easy.

It's a "creative destruction" within the capital markets. Gets the dumb money out...funds businesses that actually make money and builds upon the rubble on a stronger, firmer foundation.

[eru]

Doesn't have to happen. If central banks would start targeting nominal GDP level, we would have bubbles bursting without economy wide recessions.

See eg http://www.economist.com/blogs/freeexchange/2011/10/monetary...

[partiallypro]

That assumes the Fed can make the economy grow with the flip of a switch, and that it could contain contagions. I'm all for taking away the Fed's discretionary powers, I think that would smooth the business cycle, but it would not eliminate it. Recessions can occur naturally.