On Wednesday, Yale economics Professor Robert Shiller, who is arguably considered to be our nation’s leading expert on home prices (and someone whom I’d classify as a centrist and, normally -- although not most recently -- somewhat of an optimist when it comes to his prognostications on our economy), stated in a televised, Wall Street Journal interview that he sees “…a ‘substantial’ probability the U.S. could lurch again into recession.”
Shiller Sees ‘Substantial’ Probability of Recession
Bradley Davis
Wall Street Journal Blog
June 15, 2011, 3:17 PM ET
…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…
Truth be told in my headline of this post, a couple of those “other prominent economists” are Paul Krugman and Brad DeLong, who have also recently expressed concerns about our current economic conditions while referring to our overall situation as a, “Third Depression,” and a “Little Depression,” respectively.
When we talk about “housing” these days, the traditional econo-speak is something to the effect of: “In most of our country’s previous recessions, housing and housing construction have always led the way out of our economic doldrums.”
But, what we’re dealing with this time around is something quite different. These days, any discussion about depressed housing prices now eclipsing Great Depression-era lows translates into the following inconvenient, directly-related topics:
1.) our nation’s mortgage meltdown
2.) foreclosure fraud
3.) securitization fraud
4.) investor/securities fraud
5.) appraisal fraud
6.) origination fraud
7.) credit ratings agency fraud
8.) Wall Street greed and government/regulatory corruption
9.) the primary asset of our country’s middle class (since the top 10% of our society owns most of the marketable securities bought and sold in our markets)
10.) ongoing too-big-to-fail bank insolvency realities, and…
11.) subsequent lack of consumer demand
In short, as a New York Times editorial summed it up in its headline, three weeks ago: “As Housing Goes, So Goes The Economy.’
Tell me, what effect upon consumer demand do you think the loss of over $6 trillion in U.S. residential real estate value will have (and is having) upon the middle class?
And, what about Shiller’s recent statement, just a few days ago, that it wouldn’t surprise him to see residential real estate prices drop another 10%-25% before we see a real bottom in this market?
Here’s an excerpt (I urge you to checkout the entire post; you may click through via the link in this sentence) from a May 20th post from Barry Ritholtz, over at his Big Picture blog: “20 Startling Facts About the U.S. Housing Market.”
The Economic Collapse has put together a stupendous list of 20 startling facts about the US housing market…
1. According to Zillow, 28.4% of all single-family homes with a mortgage in the United States are now underwater.
2. Zillow has announced that the average price of a home in the U.S. is about 8% lower than it was a year ago;
3. U.S. home prices have now fallen a whopping 33% from where they were at during the peak of the housing bubble.
4. During the first quarter of 2011, home values declined at the fastest rate since late 2008.
…
6. U.S. home values have fallen an astounding 6.3 trillion dollars since the housing crisis first began.
…
18. According to a recent census report, 13% of all homes in the United States are currently sitting empty.
…
20. According to Zillow, the United States has been in a “housing recession” for 57 straight months without an end in sight…
The fact of the matter is that the residential real estate market’s getting worse for existing and new homes, not better, as you read this.
Again, the reality here is THIS. (Most existing home sales numbers posted by the NAR over the last couple/few years have been inflated by some 10%-15%, according to coverage of this story, earlier in the year. The NAR’s “revision” should include this “correction.”)
So, why am I so focused upon these statistics, you might ask?
That’d be due to the fact that Yale economist Robert Shiller’s fully aware of what I’m about to tell you: “The systematic financial pillaging of the middle class – Millionaires don’t feel rich unless they have $7.5 million while 45 million Americans live on food stamps. Another 50 percent cannot come up with $2,000 in the next 30 days.”
The systematic financial pillaging of the middle class – Millionaires don’t feel rich unless they have $7.5 million while 45 million Americans live on food stamps. Another 50 percent cannot come up with $2,000 in the next 30 days.
The MyBudget360.com blog
June 15, 2011
For over 30 years the debilitating shrinkage of the middle class has been papered over with access and use of debt. Debt in every form; mortgage debt, credit card debt, auto loans, and student loans. Yet debt is not wealth.
Americans are facing a financially nightmare where 1 out of 3 has no savings. This should come as a little surprise since the per capita income in the country is $25,000. Many workers are simply getting enough out of their stagnant paychecks to pay the monthly bills. Of course much of the real wealth has been systematically looted through bailouts and crony capitalism. There was a time when the government and even Wall Street benefitted by a growing U.S. middle class. Now all you hear from banking executives is how much cheaper it is to outsource American jobs at the same time their pay keeps soaring. Why don’t we outsource their job? The problem of course is a deep capture of our political system and a perfect fusing of Wall Street and the government. The middle class is slowly floating away as inflation created by the Fed bailouts of the too big to fail banks causes more and more financial pain.
…
The wealth inequality in our nation is a consequence of this de-regulated two-tier system of crony capitalism. As the middle class has seen their wealth and jobs being stripped from their overworked hands, the top 1 percent has enriched themselves with every subsequent bailout. As we all know through the parroted financial media, stocks over the long-run return 8 percent. Yet what if you have no savings as many Americans do? What about the fact that this does not factor in the reality of selection bias when all we see is companies that continue to survive (i.e., no failed companies in the S&P 500 right now). So you see what you want to see.
And the most important key ingredient is government backed taxpayer bailouts for the ultra wealthy… …But what we have is the financial sector simply looting the wealth of middle class Americans and providing no service other than stealing their money for bailouts. Then you have the too big to fail making billions on onerous fees like overdrafts which directly hurt the poor the most.
Americans that do have a tiny bit of wealth have it in their homes. Yet as we all know the housing market isn’t exactly doing that well right now [SEE CHART: S&P Case-Shiller 20-City Home Price Index (SPCS20RSA); House Price Index for the United States (USSTHPI)].
Didn’t the bailouts have a premise of helping middle class homeowners? Of course not. The money has been diverted for banks to speculate in global stock markets while they completely ignored the housing market. The new world of crony capitalism, where the connected win even if they lose.
Despite everything I’ve noted, above, even now, I’m not certain we’re going to “officially” enter into a double-dip recession; although, it seems that with every passing news cycle, of late, we’re hearing more and more statistical confirmation that the economy may, indeed, be headed that way.
“Unofficially,” however, when 100,000,000+ Americans are experiencing Depression-like circumstances (and I’d say this is a fairly conservative number, if you do the basic math, above), it comes as no surprise to me that our MSM and our leaders in Washington are doing little more than further alienating an already-alienated public by even mentioning the word, “recovery,” in their daily media opp’s.
Put another way, how many people have to be unemployed, impoverished, on food stamps, and/or suffering from the transgressions of 30 years of an underregulated, undertaxed status quo—to the point where scores of millions of us don’t even have enough money to retire, let alone feel enabled to find a nonexistent job in our 70’s to mitigate even that harsh reality—for the rest of our society to declare that we are, in fact, living in a Depression?
The truth is, right now, there are more people in this country living under brutally depressed economic conditions than there were during the Great Depression. And, there’s a good chance we haven’t even hit bottom. So, call it a recession; call it a “Third Depression,” or even call it a “Little Depression.”
But, if you’re out there looking for votes, and looking to speak in any sane manner which resonates with the public, the one thing you better not do is refer to it as a “recovery.”
I’d like to closeout tonight’s post with some of Bill Moyers’ closing comments (the guy’s right up there, alongside Joe Stiglitz, on my list of the people on the planet whom I respect most) in an interview he had, last week, with Amy Goodman and Juan Gonzalez over at Democracy Now! (h/t to Alternet.org, who published excerpts of it in, “Bill Moyers Discusses Independent Media and Fighting Back Against Unbridled Corporate Greed and Power.” The entire interview transcript is over at Democracy Now and may be accessed via THIS LINK.)
…I think this country is in a very precarious state at the moment. I think, as I say, the escalating, accumulating power of organized wealth is snuffing out everything public, whether it’s public broadcasting, public schools, public unions, public parks, public highways. Everything public has been under assault since the late 1970s, the early years of the Reagan administration, because there is a philosophy that’s been extant in America for a long time that anything public is less desirable than private.
And I think we’re at a very critical moment in the equilibrium. No society, no human being, can survive without balance, without equilibrium. Nothing in excess, the ancient Greeks said. And Madison, one of the great founders, one of the great framers of our Constitution, built equilibrium into our system. We don’t have equilibrium now. The power of money trumps the power of democracy today, and I’m very worried about it. I said to—and if we don’t address this, if we don’t get a handle on what we were talking about—money in politics—and find a way to thwart it, tame it, we’re in —democracy should be a break on unbridled greed and power, because capitalism, capital, like a fire, can turn from a servant, a good servant, into an evil master. And democracy is the brake on my passions and my appetites and your greed and your wealth. And we have to get that equilibrium back.
I said to a friend of mine on Wall Street, "How do you feel about the market?" He said, "Well, I’m not—I’m optimistic." And I said, "Why do you, then, look so worried?" And he said, "Because I’m not sure my optimism is justified." And I feel that way. So I fall back on the balance we owe in a—in the Italian political scientist, Gramsci, who said that he practices the pessimism of the mind and the optimism of the will. By that, he meant he sees the world as it is, without rose-colored glasses, as I try to do as a journalist. I see what’s there. That will make you pessimistic. But then you have to exercise your will optimistically, believing that each of us singly, and all of us collectively, can be an agent of change. And I have to get up every morning and imagine a more confident future, and then try to do something that day to help bring it about.
Bold type is diarist’s emphasis.
They say that “knowing the problem is half the solution.”
At a VERY fundamental level, IMHO, progressive-thinking Democrats — especially progressive-thinking Democrats that understand perception politics on Main Street -- everywhere should really wrap their brains around this most basic concept.
First, as Moyers tells us, just a few lines above, you have to “…see what’s there. That will make you pessimistic. But then you have to exercise your will optimistically, believing that each of us singly, and all of us collectively, can be an agent of change. And I have to get up every morning and imagine a more confident future, and then try to do something that day to help bring it about.”
And, once you embrace the pessimism, remember this: There are (easily) 100,000,000+ people in this country, right now, whose idea of being “hopeful” about their future starts and stops with them not having to worry about whether they'll have food on the table this evening, or money to pay the rent or mortgage (if they even have a roof over their heads, to begin with) this month.
Their future starts with a J-O-B. Today. Right now.
To them, talk of things improving “in a few years” simply. Does. Not. Resonate.
To most of them it’s a “Depression.” To others almost as bad off, it’s a “Recession.”
To Republicans, and to some Republicans that are now Independents, it’s a “Recovery.”