For several weeks now dire warnings about America's "bubble economy" have loomed like, well, a bubble over US prosperity.
Such gloom matters because it can become self-fulfilling and affect the lives of hundreds of millions. Caution is sensible. Catastrophic bubble scenarios are not.
First there was a catchy Economist magazine cover showing the Statue of Liberty's torch pricking a giant balloon bearing a surging stock market graph. Then, the Financial Times urged the Federal Reserve Bank to raise interest rates and puncture the bubble before it reaches risky 1920s dimensions.
Next came a leak of Fed board minutes hinting the central bankers were indeed poised to raise interest rates. World markets tumbled. But only until rosy US news buoyed them again: Near-zero inflation, vigorous 4.2 percent growth, productivity gains, steady labor costs, mostly strong corporate earnings.
Bubble-watchers also detected signs of ballooning in European markets. And Europe's welcome recovery did push onward, hardly pausing over a French-German quarrel that split the opening term of the president of Europe's new central bank. Pundits felt that could cause the bankers to assert their independence and raise interest rates to prick a Euro-bubble.
Altogether there has been enough bubble talk to alarm even the witches of Ensor. How justified is it?
First, make a distinction. When Fed Chairman Alan Greenspan talks about "irrational exuberance" he's citing stock prices, not the economy. And, despite the Asian jolt to exports, the US, European, and most Latin American economies are doing quite well.
Even their stock markets, though needing more than usual caution, aren't at bubble stage. Careful Warren Buffett thinks not. Shrewd Sir John Templeton long ago forecast a 10000 Dow by 2000. One major reason: all those baby boomers socking money into retirement plans. The plans mainly buy stocks. And they become a big storehouse of future purchasing power - and tax revenue.
It's always wise to be on guard against irrational exuberance. But beware, also, of irrational gloom.