Shiller of Yale Says U.S. Home Prices May Fall 'Substantially'

September 3 (Bloomberg) -- Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, talked with Bloomberg's Kathleen Hays on Sept. 1 about the outlook for the U.S. economy and housing prices.

Video.

Summary:

• RE Governor Rick Mishkin's paper - said the Fed should ignore the housing market, and speculative bubbles in general, when setting rates.
• His sense of the audience is that they generally believe that central bankers of the world should have leaned against the housing bubble a few years ago by raising rates.
• What the central bankers of the world will do next is unclear.
• Shiller's criticism of this conference is that there was too much time spent on what the Feds of the world should have done vis the housing bubble and far too little on what the Feds should do next.
• We have a crisis developing -- home prices have had "the biggest boom in world history" (not just in the US). In the US home prices have been falling and there is a very real chance that they will continue to "go down substantially" with all sorts of negative repercussions.
• A few people in the conference pointed out this developing crisis but in Shiller's opinion the discussion on "what do we do next" was not sufficiently central to the conference.
• If the recession we are likely entering now is like past recessions (and it seems to be), then a Fed cut in interest rates will "eventually" cure the recession.