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Tags: robert shiller | pandemic | fear | economy | depression

Robert Shiller: Pandemic of Fear Could Tip Economy Into Depression

(Getty)

By    |   Monday, 13 April 2020 08:36 AM

Nobel-prize winning economist Robert Shiller warns a pandemic of fear could push the economy into an undeserved depression.

“This isn’t the same story as the Great Depression. The Great Depression lasted 10 years. They didn’t have an unemployment rate under 12% until the decade was over,” the Yale University professor recently explained to CNBC.

“It’s a popular narrative. But this is a pandemic. It shouldn’t last 10 years. It should be over in one or two years,” said Shiller, the co-founder of the Case-Shiller Index, which tracks home prices around the nation.

Shiller explained that general news headlines can trigger fear.

“The shortage of supplies is generating horrible news stories that put us all on edge,” said Shiller, who was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.

“It may mean people won’t go to restaurants or sporting events in good numbers for years. You know the disease might not well be eradicated for several years from now,” said Shiller, who developed the cyclically adjusted price-earnings (CAPE) ratio market valuation measure, which is calculated using price divided by the index's average historical 10-year earnings, adjusted for inflation.

“People are scared by the talk of really high unemployment rate numbers that might becoming fairly soon — like 20%,” he noted. “It puts a whole psychological framework onto this that may be a self-fulfilling prophecy,” he said.

“The jobs market is more difficult than the stock market. The unemployment rate tends to shoot up and then only gradually come back down,” Shiller said. “It may take years for employment to come fully back,” he warned. “We may not be up to our previous peak for a long time,” he added.

Shiller isn't alone in his pessimism.

While President Donald Trump is talking about pent-up energy in the stock market riding out the coronavirus pandemic – ready to spring back to its previous high level of functionality – billionaire Mark Cuban sees a much slower return to the "new abnormal."

"I wish he was right, but he's not," Cuban told "Fox News Sunday." "I think it's going to be slower. I think there's going to be so many different ways we'll have to adapt to this new abnormal.

"People aren't going to just venture outside; they're not going to go to large gatherings; they're not going to feel confident right off the bat. There's going to be a lot of trepidation and that concern is going to lead to people holding back in spending money. We're not going to know if the virus is coming back.

However, government officials are much more optimistic.

Labor Secretary Eugene Scalia said Friday he's optimistic that the economy will bounce back, as the fundamentals remain in place, despite the coronavirus emergency.

"I am mindful of just how strong our economy was five weeks ago," Scalia said on Fox News' "Fox and Friends." "You know, at the start of March, we put out one of the strongest jobs reports we have seen in this country in 50 years. That's where we were. That's where we want to get back to...we had a blue-collar boom and now we want a blue-collar bounceback."

The fundamentals remain for that economy, despite the health emergency that still must be tackled, said Scalia.

© 2022 Newsmax Finance. All rights reserved.


StreetTalk
Nobel-prize winning economist Robert Shiller warns a pandemic of fear could push the economy into an undeserved depression.
robert shiller, pandemic, fear, economy, depression
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2020-36-13
Monday, 13 April 2020 08:36 AM
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