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SUBJECT : Atlanta Global Business Forum   [ allforu62 ]   2010.08.31

Atlanta Global Business Forum

WKF's Atlanta Global Business Forum

January 5 (Atlanta) – Yale University Professor Robert Shiller has warned for possible double dip in the global economy due to the bursting of Asias asset bubble. Shiller had predicted the recent economic crisis that was caused by the burst of the bubble in the real estate market, putting weight to his most recent forecast.

During the American Economist Association (AEA) annual meeting on Sunday, January 3, Shiller expressed his worries that, There is a possibility of a bubble within the steep recovery rate in Asia. The housing and stock market of Asia, especially those of China, have helped the global economy to maintain its balance after the recent unforeseen global economic meltdown.

Chairman Ben Bernanke of the Federal Reserve Bank (FRB) emphasized the importance of regulation. Bernanke stressed that, Having experienced the damage that asset price bubbles can cause, we must be especially vigilant in ensuring that the recent experiences are not repeated. All efforts should be made to strengthen our regulatory system to prevent a recurrence of the crisis, and to cushion the effects if another crisis occurs.

Economists attending the AEA stated that a poor job market, a crippled real estate sector and cripples banks will strain U.S. economic growth over the coming decade.

 


 

5 Questions for Robert Shiller

Despite the recovery in the global economy, there are worried voices expressing a not so bright future. Where do you stand?

The road to future isnt so nicely paved. I think credibility is the biggest issue and you cant blame it – if you look at various economic charts, you really cant expect much credibility. Once there is a credibility breach, we might be looking into a double dip.

 

Whats may be the leading factor behind the double dip?

We are looking at a continuous decrease in consumption and investment and because of reasons unknown yet, we will be facing with multiple factors that shake the economy. Examples would be the Dubai World crisis and Greeces unsustainable public debts.

 

How would you evaluate the housing market of the US and the world?

There are too many uncertainties to predict the housing market at the moment. We saw a strong rebound in the housing prices since April last year. Prices increased in San Francisco and Indianapolis by 35% as if there was a bubble. Its pretty much the same in China and elsewhere. Its hard to determine why this is happening when the global economy is still unstable. One thing we learned though was that real estate is a very speculative item.

 

You mentioned the Chinese market. Is Chinas bubble dangerous? How does Chinas stock market look?

Chinas housing prices soared to the level that is equal to the major cities in the West. Considering the fact that China is still a developing country, the housing prices in Beijing and Shanghai are beyond the capability of the residents. Basically, its a bubble. The Chinese market has experienced major changes; a sharp increase followed by an equally steep fall.

China is a country that is undergoing economic shifts so variability is only natural, but its hard to say that Chinas variability is a healthy one.

 

How do you see Koreas housing market?

Korea is more advanced that China. Korea had experienced fluctuating housing prices in the past and I expect Korea to go through it again sometime soon. 

 

Shiller is the Arthur M. Okun professor of economics at Yale University. He is the author of Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. He is ranked among the 100 most influential economists of the world. His contributions on risk sharing, financial market volatility, bubbles and crises, have received widespread attention among academics, practitioners and policy makers alike



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