Schiller: Fear of a Double Dip Could Cause One


Fear of a double dip could actually cause one opines economist Robert J Schuller in the NYT.

In fact, there is still a real risk of a double-dip recession, though it can’t be quantified by the statistical models that economists use for forecasts. Instead, the danger stems from the weakness and vulnerability of confidence — whose decline could bring markets down, further stress balance sheets and cause cuts in consumption, investment and local government expenditures.

Ultimately, the risk resides largely in social psychology. It is the fear of fear itself, of which Franklin D. Roosevelt famously spoke.

It seem that others tend to disagree.  The indicators suggest that the economy is improving and would likely not reverse itself so quickly.  But Schiller suggests the others might be missing something.

There has been a similar historical example. On Sept. 11, 1986, the Standard & Poor’s composite stock index had its biggest point drop ever, inviting many comparisons to 1929. It called public attention back to the Great Depression, even though the decline was reversed within a couple of weeks. The New York Times attributed that one-day drop to “anxiety, with computer spin,” referring to trading programs that generated huge sales. Readers were left with ambiguous interpretations of that drop, as they have been in the wake of the recent one-day decline.

Could the same thing happen with the real estate market?

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