If you think you understand what I am saying you do not understand what I am saying.

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?

Fear and euphoria are dominant forces, and fear is many multiples the size of euphoria. Bubbles go up very slowly as euphoria builds. Then fear hits, and it comes down very sharply. When I started to look at that, I was sort of intellectually shocked. Contagion is the critical phenomenon which causes the thing to fall apart.

History demonstrates that participants in financial markets are susceptible to waves of optimism. Excessive optimism shows the seeds of its own reversal in the form of imbalances that tend to grow over time.

Institutions of the newer participants in global finance had not been tested, until recently...recent crisis have underscored certain financial structure vulnerabilities that are not readily assuaged in the short run.

We can guarantee cash benefits as far out and at whatever size you like, but we cannot guarantee their purchasing power.

While local economies may experience significant price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity.