Yale professor, Robert Shiller shares his perspective on whether the U.S. is in the midst of a “late great depression” and how temporarily raising taxes could help stimulate economic recovery.
qe i think is not as prominent a polyas the austerity that we’re in. so this is a new age of austerity. it’s like the late, great depression. all right. that was well-known economist robert shiller of the case-shiller index. that was on cnbc europe earlier this week. so is the global economy really in the midst of a late, great depression? well, i sat down with professional schiller, who by the way famously predicted two big bubbles in tech stocks and housing prices. also, he does have a new book out called finance and the good here is what he had to say. please take a listen. let me just ask you. you are now famously quoted, okay. you’re famously quoted as saying we are in a state of late, great depression. i don’t know what that means. it sounds very scary. what are you trying to tell me? did i say that? yes. you were quoted in reuters and others. i think there are a lot of analogies to what we’ve been going through to that of the great depression. but i don’t think we’re really in a depression. so i must have said it slightly wrong. but certainly we have, for example, the lowest interest rates ever. long-term and short-term are at depression levels. so there is other examples as well. the persistence of high unemployment is a problem. all right. let’s go there. the persistence of high unemployment and record low interest rates. you’re really talking pretty much globally, certainly europe and the united states. does that mean we are not really in an economic recovery? is that what you’re trying to say? it depends on how you define these things. in some ways we are not in a recovery. look at the employment population ratio. it’s stuck at 58.5%. that’s kind of close to the lowest it’s been in this whole debacle. so we haven’t recovered jobs. you’re calling this the age of austerity. i’m going to assume you mean too much government spending cuts. and you know, milton freedman used to teach us that government spending as a share of gdp when it came down, that was a tax cut. i take it you don’t agree with friedman on this? i’ve been advocating raising taxes and expenditures as a temporary measure to get us out of the weak economy. so that’s the balanced budget multiplier. what happens to all those obama multipliers? we were supposed to have a 6% unemployment rate today or less. it’s over 8. it didn’t really seem like that samuelson model worked. well, that wasn’t the balanced budget expenditure. but yeah, we’ve had a worse recession than anybody expected. i don’t think it proves that the principle is wrong. i think we need to do that. we can’t give up on this economy. we have to do something. i don’t have any better solution than to temporarily — i don’t know that there is — temporarily raise taxes and expenditures. and there is no impact on the national debt. maybe we ought to let free market forces work out the rest of the corrections, robert. think of that. maybe no more government fine-tuning, no more government intervention. let’s have some strict rules and let the market operate. my book finance and the good society is all about that. i believe in markets. they do wonderful things. they create our wealth ultimately. and i would like to see them, our financial markets expanded. you got me off on the wrong foot on this by bringing out the keynesian element of my thigs. but it’s beyond that. you said the great depression. i know you better than that. but you’re the guy who said that. so i got to ask you. i mean, i don’t want to be have have some false consistency. i tell you what i believe. i believe in keynesian stimulus. but i also believe in markets, and i believe we should expand our markets, make the financial sector even more pervasive, as long as we democratize and humanize it. make it work for everyone. that’s the course we’ve been on. let’s continue on that. i don’t believe in government stimulus, but that’s subject for another talk. last question. your friend, my friend, your colleague jeremy siegle, he is very optimistic. i know you don’t always agree with him. he says stocks are going to 17,000. can i get your quick take on that? well, i think he is — he has been optimistic for a long time. i respect him a lot. by the way, when he says something, i often edge my little stockortfolio up a little bit more. but personally, i think stocks, i agree with him, that stocks are a good investment now. as long as you don’t go overboard on it. and i would advise having some stocks in one’s portfolio. all right. i’m just not as gung-ho as jeremy is. all right. i’m taking away an optimistic message. robert shiller says it’s okay to buy stocks. i like that. coming from london, thank you very much. it’s great to see you, bob, as always.