Buzzword: Asset bubble

A little pop brings us this week’s Marketplace Money buzzword: Asset bubble.

An asset bubble refers to the sudden and dangerous rise in the price of an investment or security. Years ago, it was the dot-coms. Now, it’s the subprimes.

This week, economic big-wigs are gathering for an annual Fed meeting, and many of them hope the Fed will change how it deals with bubbles. Like raising interest rates. That slows the flow of cash and deflates the asset frenzy.

Some economists think the Fed ignores early warning signs of a bubble, and by the time it gets noticed, it will already be making another sound: KA-BOOM!