I am intrigued by the idea of additional derivatives for the housing industry, but am also concerned by the fact that basic investing in financial instruments, equity, bonds, etc. have already become an excuse for trading derivatives. Buying stock in company is not longer sensible when a sophisticated trader will place bets on a derivative based on another derivative that will move the market for the stock based on the movement of those derivatives.
At some point investing has to become a fair playing field for retail investors.
In the 3rd part, Schiller talks about financial advisor-types giving objective guidance and that most people are clueless on these issues.
Hmmmm... been there, done that; gave people stern, cautionary advice on their overreaching, overpriced RE purchases using risky structures and... they ignored the guidance and skipped down the road to some clown who would whisper the sweet-nothings in their ear that they wanted to hear.
Animal spirits indeed.
I saw over and over that access to good info wasn't the problem - people having the emotional maturity to actually listen was.
People wanted, to be deluded and lied to in most instances.
Their motivating principle was simple: "Gimme that, it's mine!"
Greed, self-absorption, instant gratification, and something for nothing. No amount of good advice was cutting through that fog.
I know... I tried many times.
Schiller:
There already is "home equity insurance"; it's called a downpayment.
Hell, regular MI is what funds the FHA program - a one-time upfront mtg premium and ongoing monthly premiums.
And, now that MI is tax-deductible like mtg interest, it's not so bad. Cost of doing business if you can't or won't put more of one's own skin in the game via downpayment.
I like what he said about bailouts in part 2.
But part 3 "funny thing I will always have enough money for my expenses." Yes, what a stunning realization, because I and most other common people are too stupid to protect ourselves, so the gov't and financial companies should protect us, because they are so smart. Me dumb, gov't and bank smart.
Could this crisis be so simple as the people don;t want anymore debt. And thus are no onger confident in borrowing. For goodeness sakes most of the country is so in debt that we are enslaved.
Professor Shiller suggests that financial advice ought to be more widely available in a fashion similar to paid physician consultations as opposed to getting advice from a drug company. His comparison is flawed: Pharma companies have long corrupted the healing arts by their advertising to consumers and their incentives to medical providers.
Medicine, as practiced in the US, is rife with influence by pharmaceutical companies marketing products to physicians at company hosted & paid excursions to resort locations under the guise of "medical education."
If you get the diagnosis wrong, you are almost certain to recommend the wrong - potentially disastrously wrong - course of treatment.
Here, Robert Shiller, one of the 'top 100 economists', gets it wrong when he says that the reaction to the Great Depression is a good model - and that things would have been worse if the measures taken then had not been taken. In point of fact, the actions Hoover and then FDR took are what turned a recession into a depression and made it Great. Robert Higgs has conclusively shown this. Our clowns are doing exactly the same thing as those earlier clowns did and Shiller seems to want more of the same - a new New Deal. Good luck with that...wasn't it Einstein who said doing the same thing and expecting different results was a definition of insanity?
Ozzy,
Higgs is incorrect, I suggest you read Krugman.
I hope you still have an open mind, it so hard for the small government types to admit their philosophy is now bankrupt.
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