> What are the problems with bubbles if investors can be cushioned from their worst effects when they occur? Leverage, basically. Suppose you and a lot of oth

> What are the problems with bubbles if investors can be cushioned from their worst effects when they occur? Leverage, basically. Suppose you and a lot of other people make a six-figure salary. You're all able to borrow multiples of that figure to buy houses, which pushes the price of housing up. Banks lend freely, on the assumption that the good times won't end. Then something changes and the high salaries dry up. The lack of high-income jobs mean that 1/ house prices fall, and 2/ people can't service their mortgage. The losses are passed on to the banks and from there to the rest of the economy. What I'm describing is an amalgamation of 2000 and 2008, but I think there's a real risk of it happening, especially in an environment of rising interest rates. Leverage is dangerous and few people escape a bubble unscathed.