NEW YORK CITY—When the current asset bubble pops, just how violent will it be? The Federal Reserve is planning to kickstart inflation, and limited yield-bearing assets being chased by a glut of investment money.

It's a recipe for shake-up of some sort, and in his new post, Ethan Penner examines how the changing economic policy is creating a dangerous scenario.

Penner writes:

“Prices of financial assets are very high today, and especially so when taking into consideration the tepid global economic performance and its prospects going forward. Yields available to investors are thus very low, which could be indicative that the world is very stable and investment risk is commensurately low, or that there is an imbalance in the amount of investable funds seeking a return and the amount of investments opportunities for those funds. If the former, which I think that only a very few would argue is the case today, things are very nice indeed. If the latter is the case, then trouble lies ahead as imbalances have a way of resolving themselves and mostly in rather violent, unpredictable, and abrupt manners.”

To read the full post, "Asset Bubbles," click here. For more from Ethan Penner, click here.

Instant Insights /

Penner: Asset Bubbles and the Danger of Forcing Inflation

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