From Reuters:
One of three American economists who won the 2013 economics Nobel prize today for research into market prices and asset bubbles expressed alarm at the rapid rise in global housing prices.
Robert Shiller, who shared the 8 million Swedish crown ($1.31 million) prize with fellow laureates Eugene Fama and Lars Peter Hansen, said the US Federal Reserve’s economic stimulus and growing market speculation were creating a “bubbly” property boom.
The Royal Swedish Academy of Sciences lauded the economists’ research on the prices of stocks, bonds and other assets, saying “mispricing of assets may contribute to financial crises and, as the recent global recession illustrates, such crises can damage the overall economy.”
This was the case in the collapse of the US housing market, which helped trigger the 2008-2009 global financial crisis. Markets are at risk of committing the same error now, Shiller told Reuters after learning he had won the Nobel prize.
“This financial crisis that we’ve been going through in the last five years has been one that seems to reveal the failure to understand price movements,” Shiller said.
…China, Brazil, India, Australia, Norway and Belgium, among other countries, were witnessing similar price rises. “There are so many countries that are looking bubbly,” he said.
…”When asset prices are getting way out of line it should be cause for alarm. The monetary authorities should lean against extreme asset price movements,” Shiller said.
Too right. Where are you, Phil Lowe?
