When asked why interest rates are so low, Shilling (left) gave three reasons.
“I think we’re already in a global recession, particularly in the U.S., Europe and China,” he said. “Second, Treasuries are a safe haven and there are very few others. Third, there will be an increasing concern about deflation as economies of the world deteriorate.”
Deflation simply means supply exceeds demand, and “that’s the kind of world that we’re in,” he continued. “We already have deflation in financial assets, in tangible assets and in wages.”
When asked what the Federal Reserve should do in response, Shilling said there was very little they could do.