Robert Shiller takes a thermometer to Chinese housing

As house prices in third and fourth-tier cities fall after years of stunning growth, what does the Nobel Laureate who predicted the US subprime crisis think of an emerging Chinese asset bubble?

Professor Robert Shiller of Yale University knows a thing or two about asset bubbles: He was jointly awarded the Nobel Prize in Economics with Eugene Fama and Lars Hansen for their pioneering work on the analysis of asset prices. He predicted and warned about two great stockmarket crashes in recent US history -- the tech crunch in 2000 and the subprime housing meltdown in 2008. He first warned about the danger of a housing bubble back in 2003, when bankers were still busy minting mortgage-backed securities. Few listened to him.

The economist warned in a syndicated column a year before the collapse of Lehman Brothers that the US housing bubble, which saw prices soar 86 per cent in real, inflation-corrected terms from 1996 to 2006, was about to burst.

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