Asset bubbles: Easy to predict, hard to prevent

I watched a CNBC special documentary yesterday and it was about asset bubbles. It talked about how it rampaged the Japanese economy in the 1980s, which has yet to recover, and the U.S. housing collapse which culminated to the Lehman fall of late 2008 that sparked the worst financial turmoil in U.S. history in decades.

Asset bubbles usually have the same face: inflated property prices, low inflation, and rock-bottom interest rates. Throughout man’s history since the modern financial markets were established, he has been faced with the same circumstances but almost each time still fall prey to greed and the hollow belief that all good things never last. Government, particularly the central banks, knew of the historical trends but seemingly has the tendency to get caught up with the bullish frenzy and forget their duty to protect the interest of the financial system until the bubble just simply burst in front of them.