Assets Quote by Alan Greenspan
“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
About This Quote
Source Speech: Economic Outlook, 1998
Low inflation reduces future uncertainty, raising asset prices, but identifying irrational bubbles remains challenging.
In simple terms: Low inflation lifts asset prices, but bubbles are hard to spot.
Key Takeaway
Monitor inflation and valuation metrics closely.
Themes
economics
inflation
valuation
Mood
analytical
cautious
Type
financial
educational
When to use this quote
- investment decisions
- policy planning
- risk assessment
- market analysis
Key Concepts
price‑earnings ratios
risk premiums
asset bubbles
Questions to Reflect On
- How can investors differentiate healthy growth from bubbles?
- What indicators best signal irrational exuberance?
A Different Perspective
Signals can be ambiguous; timing is uncertain.
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