Sunday, May 17, 2009

Herding animal spirits to revive the economy


Since hitting bottom in early March, the world's major stock markets have all risen dramatically.

Some, notably in China and Brazil, reached lows last fall and again in March, before rebounding sharply, with Brazil's Bovespa up 75 percent in May compared to late October 2008, and the Shanghai Composite up 54 percent in roughly the same period.

But the stock market news just about everywhere has been very good since March. Does this suggest that the world economic crisis is coming to an end? Could it be that everyone becomes optimistic again at the same time, bringing a quick end to all our problems?

Thursday, May 7, 2009

Q&A: Yale's Robert Shiller on the Outlook for Home Prices

From TIME:

If you want to know what's going on in the U.S. housing market, chances are you follow the Case-Shiller index. Robert Shiller, the Yale University economist who helped create the home-price gauge, was something of a pop economist even before the real estate meltdown—a book published in 2000 warning about the coming crash in stocks made him a rock star of the last bubble, too. His latest book, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters For Global Capitalism, was written with Univeristy of California, Berkeley economist George Akerlof. Shiller spoke with TIME's Barbara Kiviat.

Saturday, May 2, 2009

Economic View: Depression Scares Are Hardly New

Robert Shiller in The New York Times:

What is the chance that the current downturn will morph into another Great Depression? That question has been preoccupying people for months.

The popular mood has a huge impact on the economy, so it’s worth noting what many people seem to forget: Depression scares come and go. And by one authoritative measure, the current outbreak of concern has been surprisingly mild.

Read the full commentary

Policies to Deal with the Implosion in the Mortgage Market

By Robert J. Shiller from The B.E. Journal of Economic Analysis & Policy:

This paper relates the 2006-2008 meltdown in mortgage markets to falling asset prices, excessive psychological reaction to the burst bubble, and new mortgage vehicles incapable of accommodating sudden changes in asset values. A combination of market-based and regulatory innovations are proposed. The paper suggests placing greater reliance on innovative futures markets in real estate, inducing the flow of capital to vehicles having self-regulatory features and cultivating resiliency in the market.
Download the full article