While being interviewed on CNBC on March 7, 2014, Alan Greenspan spoke a bit on the problem of irrational
exuberance in a market. Pointing to the failure of the Federal Reserve under
his chairmanship to innocuously dissolve the “dot.com” bubble in the 1990s, Greenspan
said he had come to the conclusion that asset-appreciation bubbles cannot be “defused”
(for reasons he says are in his new book) “unless you break the back of the
actual euphoria that generates the bubbles.”[1]
Alas, piercing that wave would involve nothing short of unplugging a basic
instinct in human nature; both monetary and fiscal policy would doubtless come
up short. However, I suspect that the field of rhetoric may have something to
say about how we can deflate societal exuberance, but only on the condition
that greater clarity will have been achieved in identifying whether a given
market is overvalued due to emotional excess (i.e.g, emotive greed having
reached a critical mass) circumventing normal risk-aversion.
