Depression Lurks Unless There’s More Stimulus: Robert Shiller

From Bloomberg.com:

In the Great Depression of the 1930s the U.S. government had a great deal of trouble maintaining its commitment to economic stimulus. “Pump- priming” was talked about and tried, but not consistently. The Depression could have been mostly prevented, but wasn’t. Ultimately, the reason for this policy failure was inadequate understanding of the relevant economic theory.

In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again. We appear to be in a much better situation due to the stronger efforts to date. Still, there is a danger that, because of a combination of faulty economic theory and inadequate appreciation of human psychology, as well as deep public anger, we will not continue with such stimulus on a high enough level.

Read full commentary