Every time up until now, the vocal and vociferous authorities claiming that dividend growth will be faster or required rates of return lower than in the past have been wrong. Maybe this time will be different. Bubbles do not always burst in a sudden crash, but they often do. Financial havoc may follow a crash as it disrupts the web of confidence and promises that keep financial markets running smoothly. Banks refuse to loan to businesses they fear are insolvent.
Depositors refuse to deposit their money in banks they fear are bankrupt.
The chain of financial transactions that transforms incomes into savings into business purchases of plant and equipment that employ workers collapses. Following the late-1980s crash of the Japanese stock and property markets, the Japanese economy stagnated. Japanese incomes and production would be one-quarter higher than they are today if that country's 1990s economic growth matched its 1980s pace. But prolonged depression is not inevitable after a financial crash. When stock prices fell by a quarter in one day in 1987, the American economy barely noticed.