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Nobel laureate economist predicts possible US stock market bubble

Published time: December 02, 2013 18:45
AFP Photo / Andrew Burton

AFP Photo / Andrew Burton

Robert Shiller, 2013 Nobel laureate in economics, told a German magazine sharp rises in equity and property prices may signal a dangerous financial bubble, which could have an extremely bad end.

The Sterling Professor of Economics at Yale University, who shared the Nobel Prize with two other Americans for research into market prices and asset bubbles, called the Brazilian property market and the US stock market areas where care is needed. 

"I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets," Shiller told Der Spiegel magazine. "That could end badly," he said.

Describing the overvaluation of the financial and technology sectors he commented: "I am most worried about the boom in the US stock market. Also because our economy is still weak and vulnerable".

Shiller is worried about house prices in Rio de Janeiro and Sao Paulo, saying Brazil as another area of concern.
"There, I felt a bit like in the United States of 2004," he said. The scientist draws a parallel between middle class growth and investment opportunities in Brazil to a similar trend he observed in the US around 2000.

The 2008 financial crisis was triggered with the help of a US housing bubble. "Bubbles look like this," he commented to  the magazine. "And the world is still very vulnerable to a bubble."

Financial bubbles appear when the investors don’t mind the increasing distance between asset price and market fundamentals, continuing to inject funds.

The US stock market has risen steadily over the past two months. The Dow Jones industrial average crossed 16,000 for the first time and the Standard & Poor's 500 index rose past 1,800, to a new record high.

Robert Shiller, winner of the Nobel Prize in Economics (AFP Photo / Wendy Carlson)


Comments (8)

 

Jason Bedard 04.12.2013 12:44

Just look at the pattern for recession and the stock market losses over the last 40 years. It's always some scam that causes the market to increase and then go bust. Seems to happened every 8 years. It's probably about time for it to happen again. The same people do it everytime too. They pull out well in advance of other panicked investors since they know they will be out of the way once people start to look to blame someone. It's only the slow and last groups that get caught and never have the answers as to why. It's doesn't matter what will cause it this time. Its just the symptom of the larger problem and no cure.

 

Capucine Altier 03.12.2013 14:40

Corbin Stack 03.12.2013 07:53

Sounds like these economists are finally listening to what Bill Black has to say. Do a search for the Bill Black Report on the The Real News Network, if you want to know more.

  


Bill Black is great and also professor Richard Wolff

 

Only Truth 03.12.2013 13:04

So its now a bad thing if stock markets do well? This propagandist is trying to confuse simple american twits and warp their perception of reality further.

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