Robert Schiller’s relatives live in Michigan, and some of them are close to the Tea Party, so they often ask the new Nobel laureate: “Why are you saying that?” The anecdote, told by the very same Schiller to this journalist at a The Economist Buttonwood Conference, reveals a bit about the Nobel Prize winner’s background (another point is that Schiller is very close to the Nobel George Akerlof, with whom he wrote ‘Animal Spirits’, a book that became a finalist in The Financial Times Book of the Year in 2009, only to be defeated by Sebastian Mallaby’s lionization of the hedge funds industry ‘More Money Than God’).
Schiller is a far worse speaker than writer but, in two interviews with Consejeros (in 2009 and in 2012) he has given his insights on the Spanish economy and on the global financial industry. In 2009, he pointed out the difficulty in quantifying the Spanish housing boom and bust since, “nobody in the country gives the authorities the right price of the homes.” Three years later, he gave a few hints on global economy. First, regarding the Federal Reserve’s Quantitative Easing (QE), he stated flatly that “asset prices are not among the areas of central banks.” Schiller, who voted for Obama in 2008 and 2012, supported the QE on the grounds that “it has made mortgages go down by one percentage point.”
This economist, who teaches at Yale, was also the first critic of Kenneth Rogoff and Carmen Reinhart’s ‘fetishization’ of the 100% of debt-to-GDP ratio. Schiller did not criticize it based on their methods (which later would be deemed as flawed), but on the idea that “making some numbers into targets is a mistake.” The Nobel laureate remarked that Rogoff and Reinhart never asked themselves if higher deficits lower growth, or if low growth makes deficit grow.
Schiller has always been an advocate of a moderate government intervention in financial markets. His main thesis is that Fannie Mae and Freddie Mac–the Government-owned, then Government-guaranteed, now Government-owned again US mortgage buyers–gave the American mortgage market stability by allowing people to buy long-term loans to buy their properties. In 2012, he defended new forms of financial innovation backed by the Government that would allow people to find some sort of firmer footing in their day-to-day finances. Unfortunately, political reality on both sides of the Atlantic seems to go in the opposite direction of the new Nobel winner–no Government intervention to make citizen’s lives easier, and complete and absolute obsession with magic fiscal numbers.