Krugman on European Financial Suicide

[alice wellintown]

Shiller sez,

If you go back hundreds of years, there was land speculation in this
country, but there was no housing, not much urban housing speculation.
So it was common sense. Talk to George Washington, if you could, all
right? George Washington was a land speculator, and he owned Mount
Vernon as among his speculations. But for George Washington,
speculating in real estate meant buying thousands of acres for a
shilling an acre or something like that. Not buying a house in the
city, so we’ve changed. It’s become much more proliferated as
something that everyone does. You buy this house and it’s going to
make you a lot of money. It’s also just the bubble itself — the Fed
had very loose policy and that encouraged the bubble and prices were
going up fast, so that proliferated stories about real estate as an
investment. Anyway, that’s a complicated analysis of our psychology.
But it is a unique phenomenon, really, that it was so national. And it
also reflects our better communications now. It wasn’t as easily so
national in the past.



On Thu, Apr 19, 2012 at 1:25 PM, alice wellintown
<alicewellintown at gmail.com> wrote:
> Robert Shiller: There’s no guarantee that home prices are going to go
> up. I think we’ve gotten into an illusion about that. We got into an
> illusion and it created this spectacular bubble. We have to reflect
> now that we had a kind of crazy mind-set in the last couple of
> decades, and we have to get back to thinking like people used to
> think. Housing is a depreciating asset, goes out of style; it’s going
> to end up in the wrong place. People will want to live somewhere else,
> so it’s not any automatic capital gain.
>
> Duncan:  “I think this represents a new economic system,” Duncan told
> Marketwatch in a telephone interview from his office in Bangkok. “The
> biggest impediment the world faces in overcoming this crisis is the
> broadly held misconception that we are operating in a capitalist
> system.”
>
>
>
> Ask Spain if housing is an investment.