Former President Franklin Roosevelt famously said, “The only thing we have to fear is fear itself.” For star Yale economist Robert Shiller those words have resonance for today’s U.S. economy.
“The origins of the current economic crisis can be traced to a particular kind of social epidemic: a speculative bubble that generated pervasive optimism and complacency,” he writes in The New York Times.
“That epidemic has run its course. But we are now living with the malaise it caused.”
| Robert Shiller
(Getty Images photo)
Americans grew overconfident in the economy during the housing boom of the early 2000s, Shiller argues. “Home prices rose nearly 10 percent a year on average in the United States from 1997 to 2006, long enough for many people to become accustomed to the pace and to view it as normal.”
The real estate crash that began in 2007 put an end to that view. “The mood is far different now,” Shiller writes.
A survey of home buyers he helped conduct in April and May showed the median expectation for annual home price appreciation has fallen to just 3 percent. “Amid such low expectations, buying a home with a mortgage certainly isn’t being viewed as a way to get rich,” he says.
Signs abound of economic pessimism. The Conference Board's consumer confidence index fell to 60.8 in May from 66 in April. “Consumers are considerably more apprehensive,” Conference Board economist Lynn Franco said in a statement.
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