A new book called Bubbles and How to Survive Them is making waves. Written by John Calverley, Chief Economist at American Express Bank, it has a launch next week at the IEA.

Its challenging and innovative thesis is that the dot.com bubble and the housing market bubble (if it is one) are not one-off affairs, but part of what is now a bubble economy. People move their funds from one bubble to the next, with the smart investors trying to get into a bubble early and leave before it bursts. Calverley suggests that:

By cutting interest rates so dramatically, there is a danger that central banks have shifted the bubble from stocks to residential property.

The property boom, whose surge has swept through Ireland, Spain, the Netherlands and Australia, as well as the UK, is by no means the only asset bubble. Calverley looks from the stock market fall of 2000-2001 to price spikes in bonds, gold, copper, oil and art works.

We used to have a business cycle, he tells us, but central bankers have become quite good at smoothing it, holding both inflation and unemployment in check. But volatility has not been eliminated, he suggests, just transferred to asset prices. Worried by a possible collapse of any particular asset price, the bankers increase money supply in support, or to create a new bubble elsewhere.

Are we, then, in a period of managed volatility? The bubble economy might be less damaging, although scarier, than the troughs of boom and bust. Or we might be on a divergent harmonic whose swings will become too large to control. This new territory is not for those who prefer a quiet life.