Robert Shiller leans heavily Keynesian and skews toward perma-bear… but then again over the last 10+ years a bearish attitude proved to be correct. Transcript of interview with Robert Shiller. (No free video available.)

Will Fannie and Freddie reduce the conforming loan limit?

I think they might scale back the conforming loan limit, that would be very plausible, and not make them support such big and expensive houses

This would obviously hurt values of more expensive homes since there would be less money chasing those homes.

Will there be a housing double dip?

That home prices will actually fall. I’m not predicting that, but I can easily see that happening. We have a lot of what they have shadow inventory. A lot of homes that are in default and ultimately in foreclosure, and they’ll be dumped on the market.

What should we do about the U.S. financial system?

We have to reform the financial system. I’ve written a couple books on that. This is something that involves a lot of engineering-type details, you know, like the airplane has crashed. You go to the aircraft engineers and they say, strengthen this part a little bit and choose a different alloy for this part. It’s technical stuff.

I like his analogy and think it’s accurate but I don’t like a lot of Shiller’s specific recommendations on how to improve the U.S. financial system. Like I said, he leans heavily Keynesian.