Professor Schiller, Jay Powell, FED discussed on Bloomberg Best


This is Bloomberg best. I'm Jim Bo, and I'm Ed Baxter. Stocks got off to their worst new year. In years, and then came roaring back on Friday after powerful jobs numbers and comments from fed chairman Jay Powell, saying he's listening carefully to the markets. So Jim Bloomberg's David Westin at Alix steel spoke with Robert Schiller Nobel prize winning economist and economics professor at Yale. What did you make of what Jay Powell said is it about face more or less about the extent to which the fed would listen to the markets? I think I'll is among the most carefully chosen words that I know very reasonable, man. And the idea that would swing markets is a sign of over excitement of some sort. He just said the most eminently reasonable thing that we are going to wait and see will adjust the reason the Justice they may where small and in line with expectations. There's nothing there. I think it was driving the market is a long-term narratives that is not the capsulated by anything that Powell has said, but professor Schiller was one part of what he said which was differ, forty just set a month before and that had to do with the so-called autopilot on the rolling off of the balance sheet as we're the size of the money supply quitting. The marketplace. Wasn't that a change when he said, you know, what we will take a look at that as well. Didn't sound like we're on autopilot anymore. Getting. I think that going back to Janet Yellen. And there was always this reasonable statement that we will adjust as things change. So wording is not my department. But I think that there is a general sense of crisis developing and that is what's on people's nine inch naked them. Remember things like the financial crisis almost ten years ago. Right. So that is definitely a severe backlash. I mean, you definitely had PTSD right? If you were trading in two thousand eight so with that do are we going to expect more volatility? More would be action. Well, that set us up for this year, if the market's responding so sensibly, and so mostly I two very benign statement from the Dow. We're talking psychology here now, and this is something that economists have difficulty forecasts. We're not very good at forecasting the market. We can forecast volatility volatility has been much higher. We were surprised just a couple of years ago. That volatility was so low. And now it's high again. And so what what do we do? What can we forecast but volatility, and I think that the the past crises we had two big market drops in the twentieth century one at the beginning of the two thousand and one after the financial crisis. Those are memories that resounding in people's minds. Right now, we tend to think of the last crisis and wonder if it will repeat itself. That doesn't mean I can predict any such it depends on feedback among millions of people looking at these stories and looking judging each other's reactions, but professor Schiller when you go back to those two earlier crises. There were underlying reasons there were if not bubbles something that was pretty close to a bubble in both instances once in the tech area and the other in housing, do you see those sorts of situations in the economy right now. Well, we've seen big increases in housing prices. And in stock prices are Esotique Keisha. Schiller index has shown one of the biggest booms in history. In fact, I recently ruined one of my editor op EDS, it's the third largest housing, boom. Since twenty twelve is the third largest housing boom since eighteen ninety. Well, there's some ambiguity about exactly that. But that's more or less a correct statement. And and the stock market boom since two thousand nine has been also quite dramatic. This sets us up for an atmosphere that wonders if this is substantially speculative, and that kind of wondering in general is generating all this market turmoil right now that was Nobel prize winning economist and economics professor at.

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