Bubbles, yes and no...

Article;
Cheap money party over analysts warn as fears rise of asset-bubbles.

Comment;

Bubbles in the developed countries... no, because inflation is too low. What a bubble when it did not stoke inflation? A bubble is created when there is a divergence between real prices and nominal prices. In this scene if nominal prices do not rise that means a rise in real prices of assets (investment) and income... its healthy sign that the economy is picking up it will create demand and will create inflation. But, if people expect a deflation they would post-pone their spending. Japan’s experience may reinforce the people’s expectation of a price-fall. But, the central banks are trying to replace that expectation with a price-rise expectation by engaging in loose monetary polices and inflation targeting. But, as long as inflation remains stagnant it means demand has not outpaced supply… general price-level rise when demand exceeds supply. The best way to increase demand and inflation is to increase income. This means we have to wait for recovery, until, incomes go up... But, incomes rise slowly during recession… the process of recovery will be slow… If we can directly increase incomes it will hasten the recovery. Therefore, as far, income and inflation remains low we can not expect a bubble in the developed world. Nevertheless, the expectation of a bubble in the emerging world is not a far possibility. The flood of liquidity by the developed countries’ central banks has stoked inflation in the emerging market and may have a created bubble. Especially, INDIA and China, and, our WORLD is much more connected now…