“The financial crisis is far from over!” — Robert Shiller, Yale University
Monday was a beautiful day at Yale University, where I spoke before a standing-room-only crowd of MBA students about my new book, “EconoPower: How a New Generation of Economists is Transforming the World.”
The lecturer on the book was Robert Shiller, the most in-demand professor of economics in the Yale School of Business, and for good reason. Shiller has had an uncanny ability to forecast the direction of both the stock market and real estate. In early 2000, he predicted the collapse in the Nasdaq stock market, and in 2005, he warned of an impending implosion in US real estate.
I devote an entire chapter of “EconoPower” to Shiller’s remarkable ability to see into the future.
“Is Another Great Depression Possible?”
But it wasn’t that chapter that Shiller talked about. After making some complimentary remarks about my book, he focused on my chapter, “Is Another Great Depression Possible?,” where I made the bold claim that we are no longer “depression proof,” that there were three potential scenarios that could threaten the foundation of our monetary system. The third scenario was “a series of unexpected events that could trigger a major financial accident — a run on the dollar, a real estate crisis, a major terrorist attack, or a natural disaster, that could overwhelm the monetary authorities.”
Shiller, who is publishes the famous Case-Shiller Home Price Index, stressed that the real estate crisis could be so severe that the Fed would soon have to take additional measures to counter the collapse. He told me that he is writing a book about the subprime lending scandal, and how it will affect the economy. In his view, the housing crisis is far from over.
He notes with no particular surprise that the headlines keep on rolling in: housing sales plummet, prices fall, inventories grow, and foreclosures skyrocket. According to Shiller, there is still no evidence that the bottom has been reached.
A Shocking Prediction
Then he shocked the entire audience when he predicted, “The Fed will be forced to cut rates to ZERO!”
Shiller is apparently convinced that the real estate market is so big and potentially unstable that it will test the will of Ben Bernanke to the extreme, and that all previous efforts — the aggressive cuts in the Fed Funds rates, the injection of new liquidity (M2 is growing at 16%!), and the bailout of Bear Stearns and other major financial institutions — are just not enough. “Great Depression” like actions will be necessary to keep the economy afloat.
Will the Fed be able to turn the tide? Shiller agreed with me that another Great Depression is still “unlikely,” and the tools to stabilize the monetary system, albeit artificial, are sufficient to keep a collapse from occurring. But it won’t be easy.
Fasten your seat beats, friends, the most recent financial crisis won’t be the last. And I wouldn’t be selling your gold, silver, or oil stocks any time soon.
How can you tell if we are headed for another crisis? I also have a chapter in “EconoPower” on the Midas Metal as “the ultimate indicator.” Watch gold!
[Given the gravity of Prof. Shiller’s future scenario, I am holding a World Economic Summit at FreedomFest this July 10-12, with world-class economists and financial analysts, including Steve Forbes, Jeremy Siegel (Wharton School), Steve Moore (Wall Street Journal), Congressman Ron Paul, John Mackey (CEO, Whole Foods Market), and many others. I urge you to attend. Call Tami Holland, 1-866-266-5101, or go to www.freedomfest.com.]
In liberty, AEIOU,