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Peter talks with a caller about the possibility that a credit contraction necessarily produces deflation similar to the Great Depression.

Peter differentiates between deflation in terms of value of goods compared to the price of gold and inflation in US dollar terms because the prices of items in a global market will still be going up in terms of US dollars.

Peter argues that the US is more comparable to Argentina (hyperinflation), rather than Japan, where there has always been a high savings rate.

Shiller praises Ben Bernanke's knowledge of the great depression as a useful guard against making some of the same mistakes made during that earlier time.

Shiller said he considers it to be a historic housing bust right now in the States.

Shiller emphasizes how much confidence matters.

However, if the situation isn't handled right, a serious recession is on the horizon.

The interviewer attempts to spin the conversation into how the current "correction" has provided a "good time to buy", but Shiller shoots that down by pointing to the complete misalignment that is affecting the entire economy.

1 in 10 houses in Cleveland is vacant or in foreclosure?  Crazy.

To paraphrase  Cleveland's County Treasurer, Jim Rokakis: "Fraud by sellers, fraud by appraisers, mortgage brokers, wall street...

..if they didn't know about it, they should all be fired, if they did, they were committing corrupt acts." 

There are now more foreclosures in Cleveland than any time since the Great Depression.