Robert Shiller is in Davos for that World Economic Summit that everyone used to make a big deal about but now seems kind of sad.
Remember when Davos was fun? All the economic bigwigs used to get together with celebrities to discuss ways of spending the world’s wealth. The big questions were things like whether wealth should be used to ameliorate inequality, alleviate poverty, relieve third world debt, prevent global warming. But now that the Lexus has smashed into the olive tree, those questions are off the table.
Now it’s a question of how to spend our wealth but how to recover it. Or, at least, how to prevent even more of it from vanishing into money heaven.
Where were we going with this? Oh, right. Shiller. So Shiller is in Davos and he’s chatting with CNBC’s Becky Quick. He’s trying to put a positive spin on things by saying that the new mood of economic sobriety could help us concentrate better on getting things right, clearing out bad assumptions. “I am hopeful. This is creative destruction. Something creative will come out of it,” he says.
But then Beckorina asks him about the Case-Shiller numbers. The record skips. The room goes quiet. Shiller enters Darth Vader mode.
“Our latest S&P Case-Shiller numbers look about as bad as they’ve been so nothing has changed for the good in the housing market. But…ah…it will eventually. We have a futures market that says in 2010 at the CME that it will. But that doesn’t mean that the whole economy is going to start prospering again. If you look at the Great Depression–I hate to do that, the D word–home price fell 30% until 1933. And then they stopped falling. But we still had a depression for eight more years.“
Shiller went on to say that our economic problems are much broader than housing and that merely fixing housing won’t fix the economy.