Robert Shiller is an economist, academic, and best-selling author. He is ranked among the 100 most influential economists of the world and currently serves as the Arthur M. Okun Professor of Economics at Yale. Professor Shiller shared with elEconomista some of his insights on the US and European economies during a phone interview. He recognised “a kind of chronic illness in Spanish economy”.
Would you consider the US economic environment a double dip or just a slowdown?
I don’t know if I’d qualified it as a double dip cause it´s already been two years since the end of the last recession. The econonometric forecast don’t see another recession happening. All of the ones I talked to are pretty optimistic, so I respect their judgment, but I’ve some worries about a double dip because of the decline in home prices, the decline of confidence as reflected in the stock markets, the crisis in Greece and other European nations, including Spain, by the way. All these are leading people to wonder about the underlining of our prosperity. That’s not in the included in economic models, but it seems to be very real. I think there is a substantial probability of a recession soon. Recessions have been spaced 10 years in the recent history, but I suspect we will see another one well before 10 years.
So, is the US suffering a lost decade as Japan did?
1.9 per cent growth is in the upper range of the lost decade in Japan. I’ve been worrying about that, and the thing is that I believe that the economic changes are reflections of the deep sociological changes that unfold over decades. For example, the home price decline in Japan, when prices peaked in 1991, was followed by a decline until 2006. Immediately after, the prices went up for one year and then started to go down again, so they have 20 years of price declines in Japan. In the US we had basically five years of price declines and there was also a period where we registered a slight increase. Now they’re going down again, so it’s plausible that there will be more years when home prices decline.
When will the home prices hit a bottom in the US, then?
That might not happen for years, it could be around five more years. The other question is if it could happen sooner. I think in some cities the prices will boom but I guess what I’m doubtful is that there will be the big national and international boom in housing that we saw in the early 2000’s. We will not have the colossal proportions of booms like the one in the US or Spain.
Under these circumstances, some people are already talking about the fall of the US Empire, do you agree?
There used to be European economic hegemony in centuries past. Then we had two World Wars and a Spanish Civil War that interrupted the momentum for Europe. There is no much difference between the US and Europe. Actually I think the differences between those two are exaggerated. China, India, and other emerging countries are developing faster and people already talks about the Chinese century. That said is going to take a while, but it´s true that Asian economies are showing a lot of signs of brilliance. Maybe there will not be a clear winner.
And what about Europe? Is Greece heading to a default on its debt?
It seems to me that underlying conditions in Greece are still there. It reminds me of the problems in the housing market where they bailout homeowners who cant pay out their mortgage and then they find that they´ve to bailout them again. It´s a question whether the world economy goes into another recession and if it does that I expect Greece to be in even more trouble.
What´s your take on Spain, the pink elephant in the room?
There is a kind of chronic illness in the Spanish economy. Spain is kind of similar to the US, since they´ve similar problems. I wish I could be more positive about the future of Spain but, in this case, I tend to be on the pessimistic side.
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