By Bradley Davis
Noted economist Robert Shiller said Wednesday there was a “substantial” probability the U.S. could lurch again into recession.
Noting weak global data — including a stubbornly depressed U.S. housing market — were flashing warning signs, the Yale University economist said the economy right now faced a “tipping point.”
“Forecasting models would say no” on the question of whether the U.S. will face a double-dip, Shiller said. “But I’m seeing signs that encourage me to worry about that.”
Shiller, who is one of the two men behind the S&P Case-Shiller home-price index, said home prices could still decline despite being lower than where they were more than five years ago. The summer season could see a pickup in prices, he said, but “I still worry about the general downtrend.”
“There might be a turnaround if psychology changes,” he said. But “I fear that it may just continue down.
“It just doesn’t look good,” he said in an interview with The Wall Street Journal.
General confidence about the economy is waning, Shiller said, leading to a so-called liquidity trap, in which the Federal Reserve has pumped the economy full of stimulus and consumers are still not opening their pockets.
“When the demand isn’t there, you can lower interest rates all the way to zero and people are still not willing to spend — that’s where we are right now,” Shiller said.
Meanwhile, as Greece teeters on insolvency, Shiller said the continuing stream of negative headlines was likely to have a negative impact on global confidence. “Stories like this, even if it’s from a small country, can have a vivid impact,” he said.
“I don’t think it’s overblown,” Shiller said of concerns Greece could threaten to topple the global financial system much the way the failing of Lehman Brothers brought the global system to its knees in 2008.
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