Here is what a real bubble means
Just came across this article in Wikipedia about Japan's real estate bubble:
The most shocking number: land under the Imperial Palace cost more than the whole state of California!
What can we infer from this example? That we are nowhere near the bust stage. If Japan is an indicator, real estate bubbles begin to bust when a square meter costs $1.5 mln. Until then, we are in a safe territory.
And if Japan's residential real estatehas managed to lose 90% of its value, and office real estate - 99%, while still remaining the most expensive in the world, this just shows you how much it was overpriced in the first place.
American real estate is among the most expensive in the world, but certainly not the most expensive. So our own "bubble" that everybody is talking about has not even caught up with the wet blob that remained after the collapse of Japan's bubble. Prices could well grow 1000% from today's level.
And grow they will. There is no other tool in the Fed's disposal to paint the picture of a growing economy. Of course, they will not imitate their Japonese colleagues. They won't inflate prices to $1.5 mln dollars per square meter. But they will proceed nonetheless.