December 9th, 2013 by James
This year’s Nobel Prize for economics has warned that sharp rises in equity and property prices may lead to a dangerous financial bubble and may end badly.
Robert Shiller, who won the Noble prize with two other Americans for research into market prices and asset bubbles, pinpointed the U.S. stock market and Brazilian property market as areas of concern.
“I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets,” Shiller told Sunday’s Der Spiegel magazine. “That could end badly,” he said.
“I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable,” he said, while describing the financial and technology sectors as overvalued.
The U.S. housing market collapse helped trigger the global financial crisis in 2008-2009.
“Bubbles look like this. And the world is still very vulnerable to a bubble,” he said.
Shiller added that he was hearing arguments about investment opportunities and a growing middle class in Brazil that he had heard in the United States around the year 2000. “There, I felt a bit like in the United States of 2004,” he said.
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