Lyric discussion by Lax 

Cover art for Blinded By Rainbows lyrics by Rolling Stones, The

Its simple really.

He is saying that all these bad things are going wrong in the world. People are dying in wars, people have given up hope of happyness, and you sit there surrounding yourself with things that make you happy so that those things dont bring you down. People know things are going wrong, but they choose to ignore it and surrond themselves with things that dont remind them of those things and chose to live in ignorance.

Hence, you are being "blinded by rainbows". You surround yourself with rainbows so that you are blinded from the things going wrong in the world. Rather depressing.