Why a Dip in Asset Prices Might Be a Good Thing

Is there an argument that high asset prices are bad news, and that their declines can be OK? We’re familiar with the contention that dangerous bubbles should be popped, but is there another way of justifying this contrarian intuition? I’d like to lay one out, keeping in mind that this is speculation and not an endorsement.

Let’s start with an observation: In a volatile and uncertain time politically, we have observed sky-high prices for blue-chip U.S. equities. Other asset prices also seem to be remarkably high: home values and rentals in many of the world’s top-tier cities, negative real rates and sometimes negative nominal rates on the safest government securities, and the formerly skyrocketing and still quite high price of Bitcoin and other crypto-assets.