Well, maybe it wasn’t all the Fed’s fault, Shiller says.
Read: Why some Americans are getting richer than others He rounds up other culprits.
If businesses invest more, this would create more growth and boost confidence and spending even more.
We are seeing signs that this feedback loop is at work in the better economic numbers in the past two quarters.
Things change in the economy because of narratives.” Read: The next bear market gets closer every time stocks hit a new record That makes a lot of sense, as much as we like to think of ourselves as rational beings.
After all, from the early days of sitting around fires or drawing on walls inside caves, humans have been wired to tune in to storytelling, especially when stories have an emotional angle.
But business confidence has shot up overall, according to Fed surveys, and this may create its own feedback loop.
Which brings us to another troubling economic narrative, the “don’t worry, be happy” market meme. “We’re just not that worried that other investors will pull out,” Shiller says. But the problem, Shiller says, is that right before 10 of the 13 bear markets since 1871 volatility was eerily low — just as it is now.