Bob Shiller Warns Of "Parallels To 1937"

Tyler Durden's picture

Authored by Robert Shiller, originally posted Op-Ed at The Guardian,

The depression that followed the stock-market crash of 1929 took a turn for the worse eight years later, and recovery came only with the enormous economic stimulus provided by the second world war, a conflict that cost more than 60 million lives. By the time recovery finally arrived, much of Europe and Asia lay in ruins.

The current world situation is not nearly so dire, but there are parallels, particularly to 1937. Now, as then, people have been disappointed for a long time, and many are despairing.

They are becoming more fearful for their long-term economic future. And such fears can have severe consequences.

For example, the impact of the 2008 financial crisis on the Ukrainian and Russian economies might ultimately be behind the recent war there.

According to the International Monetary Fund, both Ukraine and Russia experienced spectacular growth from 2002 to 2007: over those five years, real per capita GDP rose 52% in Ukraine and 46% in Russia.

That is history now: real per capita GDP growth was only 0.2% last year in Ukraine, and only 1.3% in Russia. The discontent generated by such disappointment may help to explain Ukrainian separatists' anger, Russians' discontent, and the Russian president Vladimir Putin's decision to annex Crimea and to support the separatists.

There is a name for the despair that has been driving discontent – and not only in Russia and Ukraine – since the financial crisis.

That name is the "new normal," referring to long-term diminished prospects for economic growth, a term popularized by Bill Gross, a founder of bond giant PIMCO.

The despair felt after 1937 led to the emergence of similar new terms then, too. "Secular stagnation", referring to long-term economic malaise, is one example. The word secular comes from the Latin saeculum, meaning a generation or a century.

The word stagnation suggests a swamp, implying a breeding ground for virulent dangers. In the late 1930s, people were also worrying about discontent in Europe, which had already powered the rise of Adolf Hitler and Benito Mussolini.

The other term that suddenly became prominent around 1937 was "underconsumptionism" – the theory that fearful people may want to save too much for difficult times ahead.

Moreover, the amount of saving that people desire exceeds the available investment opportunities. As a result, the desire to save will not add to aggregate saving to start new businesses, construct and sell new buildings, and so forth.

Though investors may bid up prices of existing capital assets, their attempts to save only slow down the economy.

Secular stagnation and underconsumptionism are terms that betray an underlying pessimism, which, by discouraging spending, not only reinforces a weak economy, but also generates anger, intolerance, and a potential for violence.

In his magnum opus The Moral Consequences of Economic Growth, Benjamin M Friedman showed many examples of declining economic growth giving rise – with variable and sometimes long lags – to intolerance, aggressive nationalism, and war.

He concluded:

"The value of a rising standard of living lies not just in the concrete improvements it brings to how individuals live but in how it shapes the social, political, and ultimately the moral character of a people."

Some will doubt the importance of economic growth. Maybe, many say, we are too ambitious and ought to enjoy a higher quality of life with more leisure. Maybe they are right.

But the real issue is self-esteem and the social-comparison processes that the psychologist Leon Festinger observed as a universal human trait.

Though many will deny it, we are always comparing ourselves with others, and hoping to climb the social ladder. People will never be happy with newfound opportunities for leisure if it seems to signal their failure relative to others.

The hope that economic growth promotes peace and tolerance is based on people's tendency to compare themselves not just to others in the present, but also to the what they remember of people – including themselves – in the past.

According to Friedman:

"Obviously nothing can enable the majority of the population to be better off than everyone else. But not only is it possible for most people to be better off than they used to be, that is precisely what economic growth means."

The downside of the sanctions imposed against Russia for its behaviour in eastern Ukraine is that they may produce a recession throughout Europe and beyond.

That will leave the world with unhappy Russians, unhappy Ukrainians, and unhappy Europeans whose sense of confidence and support for peaceful democratic institutions will weaken.

While some kinds of sanctions against international aggression appear to be necessary, we must remain mindful of the risks associated with extreme or punishing measures. It would be highly desirable to come to an agreement to end the sanctions; to integrate Russia (and Ukraine) more fully into the world economy; and to couple these steps with expansionary economic policies.

A satisfactory resolution of the current conflict requires nothing less.

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holdbuysell's picture

"The discontent generated by such disappointment may help to explain Ukrainian separatists' anger, Russians' discontent, and the Russian president Vladimir Putin's decision to annex Crimea and to support the separatists."

Mmk, because it had nothing to do with Crimea's warm-water port being strategically significant? /s

Manthong's picture

He does mean the way the Chancellor usurped power the way that the president is attempting to do today, right?

EnslavethechildrenforBen's picture

The parallel is that Jews are once again printing themselves money for free and bidding up the cost of everything, causing the rest of us to go without. They print, we work. They buy we rent. Fun game.

rick4654's picture





EnslavethechildrenforBen's picture

Don't be such a Jew bogart, Pass me your crack pipe

philipat's picture

But in this example, there IS still growth. A better illustrartion would be what happens when we get the next phase of the 2008 collapse and Central Banks are unable to provide much more stimulus? Yes, Europe will go into recession but so will The US, which is where the Schiller analogy is far more likely tp play out.

EnslavethechildrenforBen's picture

Weimar Germany, hyperinflation, rich Jews starving working Germans by printing press, Jew Federal Reserve, Jew Wall St, history repeats itself, nothing changes but the names, who will be the first to be put in the gas chamber this time?

The9thDoctor's picture

Doesn't anyone find it ironic that the first black president of the US supports a neo-Nazi regime in Ukraine, and Russia is the "bad guy" in all of this?

Doesn't anyone find it ironic that not wanting to send troops to fight ISIL is considered "isolationism", yet the White House regime imposes sanctions on Russia over the neo-Nazi Ukraine situation, when stopping trade is the very essence of "isolationism"?

It's Blackwhite in 1984.

TVP's picture

Pathetic losers type in all caps, use excessive exclamations, and can't spell for shit becuase they're so heated over an insignificant internet argument.  

rick4654's picture


forexskin's picture

take off the caps lock, francis

RadioactiveRant's picture

Yellen (Fed) is a jew, Bernanke was a jew, Jack Lew (Treasury) is a jew, Jeffrey Zients (White House Ecnomic Council) is jewish, Jason Furman ( Council of Economic Advisors) is jewish, Jamie Dimon (JPM) married a jew at a jewish ceremony,.. They seem to have a lot of influence for a race that makes up less than 1.5% of the US population.

sleigher's picture

OK.  Who owns the Fed?  Don't say member banks.


TeethVillage88s's picture

Did you see James Corbett Movies on the Federal Reserve? He lays out like 3-4 Alternatives to Fractional Reserve banking suggesting that a combination of ideas would be much better than having the FED give TARP & QE to it's Shareholders who caused the 2008 Global Financial Crisis.

The Story of the FED is very much a True Conspiracy that will get people involved.

This Idea of USA as an Empire with Military Bases & Embassies all over the world to monitor, Create, and protect Trade is an Important Piece.

Could we Citizens "Dissolve" the US Congress & Government?

The problem is not only Constitutional, but how do we deal with the many Outposts that could be attacked and how do we deal with who gets "Blame and Responsibility".

I think it is easy. We have a Defense Secretary, a huge chain of command at the Pentagon, and Local Commanders & Ambassadors on the Ground or in Ships. Commanders know they have the responsibility and their organizations & maybe congress can work out the details.

We need a Legal way to Dissolve the USA Government, to kick out Incumbents, and to Select new Government & Representatives.

The Time is Now. The time is Right. Secessionist movements have been building ever since Barak Obama got Elected Puppet in Chief.

NihilistZero's picture

We need a Legal way to Dissolve the USA Government, to kick out Incumbents, and to Select new Government & Representatives.

I need people who are smart enough to read ZH to get a fucking clue and realize there is no "legal" or "political" way to repair the USA Government.  Better to docus your energies on making the best of it as is...

TeethVillage88s's picture

So you don't see a series of Challenges to the State through:

- Secessionist States
- Military Coup
- Article 15
- Assassination of key Media Owners
- IRS, Regulators, or NSA going after both Big Bankers & Federal Officials
- Rouge Military or Intelligence personnel going after blackmail or intimidation or harming US "Big Shots" of every kind to create Chaos, Panic, shocks to the financial system, and to embarrass the people that tout US History as being Immaculate and Praise Worthy of the Entire World under the guise of a "Democracy" or a "Nation of Peace"

After all we are the biggest, Dumb Assholes, that have brought the both the 2009 Global Financial Crisis, the Intelligence to Blackmail all world leaders, and... brought us to the brink of both World Depression and the Next Global War.

But if you feel the elite is working for you this sounds all wrong OR maybe... we all have adapted to Fascism through pacifism.

Richard Feynman's picture

YOUR missing the 500LB elephant in the WHORE-HOUSE(USA); All the party's you mention are waiting and/or collecting their $5Milion USD actuarial pension plan; Courtesy of FREE FIAT TO INFINITE;

AIPAC has sent up the MOST EVIL self-perpetuating KENNEL OF INSANE MONKEYS in HUMAN HISTORY; All involved want to get their Banana's and retire;

TeethVillage88s's picture

True, but there are some hard asses that were raised in the Midwest, the South, the West, and in Texas.

In fact military retirees are attracted to these places.

At some point Texans won't wait or Tolerate, this sets the example for many others and would include Promise Keepers, Oath Keepers, Proud people of all kinds.

Angry White Dude's picture

Meh. There are tons of people who say they would or will take up arms. And I believe many would and will if and when mass civil unrest erupts. But none of these people are going to be the ones to fire the first shot and be the cause of the unrest/revolution/whatever. There aren't too many John Brown types out there anymore. And rationally so. I agree with the above comment that the U.S. political and legal systems have reached a state where there are no longer any viable, practical means of effecting change.

The U.S. is effectively an oligarchy and none of the oligarchs have any rational basis for wanting meaningful change. The system perpetuates and expands their power and wealth. They will squash any potential threat to that system. It sucks for those who aren't in the club, as they say, and we can shout until we're blue in the face about how things "should" be, and that might make us feel a little better, but it will never make any difference. Which brings me to my point - this article is about historical parallels. I think the parallel isn't so much 1937, or any other time in last 100-ish years, but rather pre-revolutionary France. The current oligarchs are the aristrocracy, who fight amongst themselves for power and money, and against any encroachment on their privileges. The oligarchs are immune to the rule of law - they are not prosecuted or held civilly liable for their actions, and the courts have repeatedly demonstrated that their decisions are results-driven in that they start with the desired outcome and shape the law and legal precedents around that outcome.

And this isn't going to change anytime soon because there isn't a critical mass of people who are wiling to act outside of the system to change it. To change it outside the system, you need a critical mass of people to either engage in either violence or nonparticipation (stop paying taxes, stop working on critical infrastructure, etc.). And there are not enough people who are willing to do one or the other to wrest control away from the current holders of power. And that makes perfect sense, because very few people have the courage of their convictions to choose one of those paths knowing it will get them killed or locked up for the rest of their lives. Yes there are some, perhaps even many. But they're not organized, and if they are, there aren't enough of them.

Although one could argue that the system could be changed by the rise of a charismatic populist leader in the vein of Napoleon, Hitler, Cromwell, Mao or Stalin in the U.S., the rise of such a person is highly unlikely because technology makes it simple for the elites to identify and subvert (by tearing them down or buying them off) any such comer before they are able to build a critical mass of followers. Empircally, the most likely candidate for such a person is someone in the black community (on the premise that American blacks suffer some of the highest concentrations of extreme poverty, systemic discrimination by law enforcement and lack of paths for upward mobility), but as we've seen every such leader has either been murdered (Malcolm X, MLK) or co-opted by the elites (Jesse Jackson, Al Sharpton).

Barring a cataclysmic event like a regional/national health pandemic, EMP or disruption in food supply, all of which are certainly possible, but none of which are likely much less probable, the U.S. simply isn't going to see any meaningful change to its system. The U.S. produces more than enough bread and circuses to keep the masses placated for the foreseable future. And it has more than enough open real estate to inter any groups of people who might organize to effect change outside the system.



TeethVillage88s's picture

Good Point.

Why wouldn't the CIA create Mind Control Subjects to start a new US Government... or to Clean out the US Government of the Dead Wood.

Very Astute. CIA can be the start of a Revolution, a real revolution, and a great new patriotic movement.

From the mouths of babes or from the bowels of our secret squirrels...

teslaberry's picture

chaos cannot create order. chaos can and is used by ordered organized interests to help push their own agendas. 


but order comes from organization and the projection of control---not from simple destruction. 

for an army to fight, the army must eat. eating is logistics, logistics is organization and control.

TeethVillage88s's picture

Angry White Dude made some real good comments above.

Your point would seem very much like common sense.

I wonder about Sun Tsu and the art of war. Strategies can use everything and anything... deception, proliferation of Organizations, Shell companies, Proxies, News Paper Stories proporting to tell the truth like the NYT, Political Speeches about downing of commercial aircraft, video of beheadings and destruction of churches and gas attacks, US History Books, Censure of National Archives, ...

Technology changes everything. Probably the groups like Bilderberg, CFR, Trilateral Commission, Club of Rome... spend time trying to prepare for new paradigms and the power of "Information". Seems unlikely that one man could make such a huge difference.

Science Fiction Novels often make this point that it comes down to a single man who is probably part of the system who has to save the world. Often it hinges on making a "Decision" or following orders.

Annonymous seems to play in this playground also.

Blano's picture

I thought the same thing about Texans before I moved here.  Now that I've been here a couple years, I'm a little skeptical.

TeethVillage88s's picture

Yeah, if we've been out in the world there is no choice but to be Skeptical of Career men stepping forward.

Maybe a group of Disabled men and men on welfare combined with men who have prison records and as such are "Disenfranchised".

Maybe Annonymous is a group just like that.

Richard Feynman's picture

"Rogue Military" comes to my mind; In my entire life of working with special force people; Everyone that I have ever known that has taken a stance that you purport has met an early death;

Lastly today unless you tell them whether MIL or COP that your are willing to SHOOT & KILL USA citizens when ordered they will not even let you near MIL or COP jobs.

The People controlling the USA aren't stupid they control both sides of the debate; They control all economic
producing paradigms that matter; Your either a
player or your sorry ASS is rotting in prison.

I ONLY know of one way to SURVIVE the USA if you
aint' on the USA .GOV pension PAYROLL PLAN; and
that is to NOT LIVE There and never go there.


TeethVillage88s's picture

You could be right about all of that. The 1970s was a wild & wooly time, but seems there was not as much control over the military.

Certainly the military knows it's people very well.

And I like your point about them controlling both sides of the debate or issue. It seems both the military and FBI had programs to infiltrate groups of opposition... and even to provide key material, leadership, or expertise to push groups forward.

Groups do seems to create a vulnerable state. In my mind I would think smart people exist in all government agencies... they are part of the system and have been part of other systems.

These employees are where the threat would come from. Mostly because they are smarter than 99% of the population.


The USA has become a Nation of Bureaucrats.

We wait for promotions, needed bonuses, and are loyal to anyone that will give us a boost to the next career or next higher level. Why? Because we have Debt, We want our kids to go to Universities, we want Retirements, We buy houses too big for our budgets, we drive 2 or more nice cars and want toys like Ski-doos and ATVs.

USA People are like Stuffed shirts except we live for our families, kids, and we put time aside on the weekend to be with our loved ones. Bureaucrats.


It is worse than that we are becoming the UK, with Low Wages, Low Benefits, and High Household Debt to GDP of 200% per household...

Look at what the Rothschild's did to United Kingdom:

UK External Debt to GDP is = 462%
Ireland External Debt to GDP is = 1061%

Greece, France, Portugal & Spain all look better than the United Kingdom who have Enjoyed the Rothschild's indomitable "Banking Expertise" for over 200 Years.

We should say rather the Rothschild's Interminable "Banking Expertise".

IN 1980 the USA was looking Sweet, till Ronald Reagan got into Office:

Debt to GDP = 35% in 1980
Debt to GDP = 100% Today

Wages & Compensation = Decrease
Household & Private Debt = Exponential Increase
Federal Debt & Budget = Exponential Increase
Corporate Taxes & Tax Base = decreasing

TBTF Bailouts, Bail-Ins, & QE = Exponential Increase
Sale of US Assets & Property to Foreigners = Exponential Increase.

Household Debt to GDP for United Kingdom©
2011:Q4: 204.34306 Ratio HDTGPDGBQ163N, Updated: 2013-10-01

Rakshas's picture

Bear in mind your Debt to GDP figures need to be adjusted for the actual GDP not the bullshit reported by which puts the ratio substantially higher than 1:1 for the USA........

......when it becomes serious you have to lie........classic

TeethVillage88s's picture


True. It is always hard to cover all the bases.

Fake: GDP, Official Inflation, Velocity, Debt to GDP, what savers deserve as citizens depositing in bank accounts, Value of Fixed Income Citizens, Value of US Retirees, ....well let's stress Retirees.

Govt. Stats are Criminal. Agree.

Govt. Stat serve government purposes, but actually this is the only way to work and figure Social Security Cost of living increases...

GDP & Unemployment are bullshit creations!!!

?? Damn Right!!!!

Richard Feynman's picture

This is the only rational comment today on ZH.

Anybody that thinks that the USA can be repaired
is insane and/or poorly educated;

The USA is a rotten corpse of a NATION; 'Fixing'
the USA would only result in an even more UGLY
frankenstein monster;

Even the Flounding Fathers said "BLOOD MUST FLOW EVERY FEW GENERATIONS"; Time for FULL RESET destroy all that is USA, move on; Enjoy your life; Far from the USA.

People who want to FIX the USA are those who have a Hamiltonian Interest in the Status-QUO. Get over it
and MOVE ON.

sleigher's picture

Bring back the republic!  Out with the US Corporation.  Those seats sit vacant while the corporation pretends to be a government.

lost money's picture

Hitler ws right, it's all the fault of the JOOOOSSS

Rakshas's picture

.....hmmmmm AH, appropriate initials i suppose, obviously had a hard on for the whole racial purtiy thing and definitely had a hate on for the "chosen ones" - fuck knows where that came from for sure and I don't buy into the hate someone for thier race alone by any means but I think human history has shown repeatedly that self proclaimed exceptionalism ends badly for the "chosen-people-du-jour.  I think it is a natural truism that when one proclaims ones superiority it invites challenge and in this case when a people deem themselves superior to the other 7 billion souls on the planet there is bound to be some friction.

Insofar as the parallels well that is to be expected I think, the same puppet masters are pulling the same strings........

VegasBob's picture

What I find interesting is that one of my long-time friends, who is very wealthy and happens to be Jewish, thinks that "the economy is firing on all cylinders" and that stocks are about to rocket higher to the moon and beyond.

I almost asked him what planet he was talking about, but I didn't want to challenge his delusions.  He'll fingure it out after his stock portfolio takes a 40-60% hit.

max2205's picture

Join the fucking club. I've been unhappy for 8 years

H. Perowne's picture

Listening to these Keynesian not-so-useful idiot apologists, one might find themself convinced that wet sidewalks cause rain. Oh, well. Good enough for the Economist, I suppose. Thank you for trying Bob. The exit is that way.

ZerOhead's picture

"But the real issue is self-esteem and the social-comparison processes that the psychologist Leon Festinger observed as a universal human trait."

And here I thought the problem was that if we don't continue to create enough new debt to buy new useless crap with so we can pay off the old debt we used to buy old useless crap with... plus interest... the entire ponzi system collapses.

So it's all about SELF-ESTEEM then.

I'm going to have to borrow some money so I can buy myself some one day...

hobopants's picture

Thats just it, we need to disassociate the idea of consumption with self worth. Find meaning elsewhere or perish.

RaceToTheBottom's picture

"Though many will deny it, we are always comparing ourselves with others,"


It is not so much comparison with the here and now.  It is the comparison of the past 7 years.  

WS Scum that caused all this have profited while others have paid.  

I don't want equality with them.  

I want PAYBACK for them.  I want to see them HOMELESS and DESTITUTE, if they are even ALLOWED TO BE ALIVE.

Freddie's picture

Crimea was part of Russia and Putin did not annex it.  The shades of Mussolini and Hitler is Obama, Cameron, Bibi, the EU, Ergogan and other NWO scum like the scum in Kiev.

Midstyles's picture

my co-worker's step-aunt makes $76 /hour on the laptop . She has been fired from work for nine months but last month her payment was $16491 just working on the laptop for a few hours. Get More Information...

booboo's picture

"For example, the impact of the 2008 financial crisis on the Ukrainian and Russian economies might ultimately be behind the recent war there"

stopped reading there.

Shill (er)


booboo's picture

The move by the fascist due to the financial crisis was completed by 2002 and summed up in the Patriot Act and the creation of the Department of Homeland Security, Bob and most of you are looking towards the horizon for the coming Four Horseman when they behind you. Those guys hanging there might as well represent the Founding Fathers.

The Capitalist Review's picture

Shiller is good when it comes to market history, valuations and the housing market.  He's a disaster when he then tries to leverage those thoughts into the actual functioning of the economy. The pings of '37 are better explained by another Bob - Bob Higgs and Regime Uncertainty.  It's completely rational for people to hold cash when either bracing for a crisis or coming out of one, when they don't beleive that solid opportunities will arise.  Consumer preference is all that matters and the Keynesian nonsense of "too much saving" has been blown wide open myriad times over.  

NoDebt's picture

Well said, I think.  Now I just need to figure out whether I'm bracing for a coming crisis or recovering from one we've recently come out of.

Mmmmmm.... I think 'eye of the hurricane' best describes it.  Too late to stop the devastation that's already happened, too early to take the boards off the windows and start rebuilding.