Robert Shiller (bubble master) weighs in on the
origin of the financial crisis:
“This crisis was the result of psychological contagion and speculative bubbles and also the result of poor risk management"...
This echoes the theme of his outstanding:
Sub-Prime Solution which not only effectively diagnoses a root cause of the current crisis not often discussed (improper investor education), but also offers novel solutions.
For good discussions of bubbles, one could find no better source than Robert Shiller. His bubble classic:
Irrational Exuberance invalidates the specious argument that "real estate never goes down" (conventional wisdom not long ago) and offers the counterpoint that real estate rarely goes up much above inflation.
Figures and charts will be coming your way soon that help elucidate Shiller's points and will enable you to see how far out of whack we became and where we are now that the markets have been correcting... stay tuned!
Shiller's take on the crisis underscores the dual themes of the It's your Money event: that saving and investing intelligently will not only improve your balance sheet (it will!), but also that it will help make the economy, stock and housing markets more robust. All three, after all, are simply the accumulation and interaction of all of the individual decisions that we make.
SM
