Sometimes the best refutation is not to bother debunking the lie but simply tell the truth. I’m pretty shocked to find the truth, in this case, coming from a professor at Yale University. But Business Insider called it right: “Robert Shiller Destroys The Idea Of Investing In A Home.”
“Robert Shiller, the Yale economist who nailed the housing bubble before it burst, was on Bloomberg Television with Trish Regan and Adam Johnson on Wednesday afternoon to discuss the U.S. housing market. As usual, Shiller was reluctant to declare that home prices had bottomed. He explained that the housing market is a speculative one and that there’s no telling which way prices would go tomorrow. He also explained that there wasn’t much reason to believe that home prices would appreciate back to levels seen during the last cycle”
Of course, Shiller didn’t go out of his way to attack anyone by name. But by his simple and commonsense observations about why a home can never be an investment in normal times, he showed by contrast that politicians and economists in our present regime are nothing more than scam artists. While Bernanke basically campaigned to George W. Bush to be Greenspan’s successor by denying that Greenspan’s housing boom was a bubble, Shiller points out that from 1890 to 1990 the housing market stayed flat if measured in real terms. There is no reason to think of housing as an investment. It was recent money games that produced such an illusion, nurtured by the promises of politicians.
INTERVIEWER: “Then why buy a home? People trap their savings in a home. They’re running an opportunity cost of not having that money liquid to earn a better return in the market. Why do it?”
SHILLER: “Absolutely! Housing traditionally is not viewed as a great investment. It takes maintenance, it depreciates, it goes out of style. All of those are problems. And there’s technical progress in housing. So, new ones are better.”
Yet all these obvious facts was ignored and hidden by virtually the entire mainstream financial news industry. Politicians encouraged the same illusion. When someone would point out that Americans were saving less and less (coinciding with the time that Greenspan reduced interest rates to the point that one might as well have stuffed cash in one’s mattress as put it in a bank savings account), some bubble cheerleader would immediately reply that Americans were better off because their savings was in their housing values.
Both parties were involved in the housing scam to some extent. The Democrats vociferously defended Fannie Mae when it was obviously unsound. Yet Bush himself was a big pusher of the “ownership society,” making impossible promises to help minorities that left them holding the bag while the real estate industry made money selling impossible debt loads and passing them on to investors.
By pointing out some basic economic truths, I think Shiller has provided help for viewers to stay grounded in reality. Politicians are still dreaming of another economic bubble, be it “green energy” or some other nonsense. They will keep pretending the “the American dream” is something that politicians and economists can arrange for everyone, and thus turn it into a nightmare.
The only way we’re going to see more people truly attain “the American dream” is if they deal with reality, and don’t trust in the fantasies of scamming politicians.