George Melloan: The Fed's Asset-Inflation Machine

Stock-market winners should remember what happened to those who cashed in gains for more debt before 2008.

Feb. 6, 2013 6:47 p.m. ET

In a 1996 speech to the American Enterprise Institute, Federal Reserve Chairman Alan Greenspan famously warned about the dangers when "irrational exuberance" fueled asset inflation. By that he meant that rising values of stocks and real estate might reflect only a cheapened dollar, not an increase in their real worth. Since he was the man in charge of the dollar, his remark caused quite a stir.

We've learned a lot about asset inflation since that speech, but maybe not enough. The nearly 2,000-point rise in the...

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