The election of Donald Trump is sending markets into a frenzy of greed and irrationality that could end up in a rerun of the 1929 stock market crash, warns a prominent Nobel-winning economist. Robert Shiller — the “Shiller” in the Case Shiller Home Price Index — told an audience at the World Economic Forum that Trump’s election is a “horrible nightmare” that could result in a new nuclear arms race. Trump's election is also creating an economic “narrative” that is pushing markets to be unreasonably optimistic about future prospects, Shiller said.

A TV news report shows U.S. President-elect Donald Trump as prices on the Frankfurt Stock Exchange spike in reaction to the news Trump had defeated Hillary Clinton in November 2016. (Photo: Alex Kraus/Bloomberg via Getty Images) “Trump is a phenomenal motivational speaker. He may not be my taste, but he is telling people that it is alright to flaunt your wealth, that it is OK to do whatever you want,” Shiller said, as quoted at The Daily Telegraph. Since the U.S. election in November, the Dow Jones Industrial Average has hit more than a dozen all-time highs, rising some 11.5 per cent and flirting with the psychologically important 20,000 mark. Bonds have been under intense pressure, because traders believe Trump’s era will bring such fast growth that inflation will accelerate substantially for the first time in a decade.

Yale University professor Robert Shiller shared the 2013 Nobel price in economics, for his work on understanding how financial markets work. (Photo: Wendy Carlson/Getty Images) In a column published Thursday in The Guardian, Shiller suggested that this is a sign of bad times ahead. “The closest we can come to Trump among former U.S. presidents might be Calvin Coolidge, an extremely pro-business tax cutter,” Shiller wrote, referring to the president who famously declared that “the chief business of the American people is business.” “The U.S. economy during the Coolidge administration was very successful, but the boom ended badly in 1929, just after Coolidge stepped down, with the stock-market crash and the beginning of the Great Depression,” Shiller wrote. “During the 1930s, the 1920s were looked upon wistfully, but also as a time of fakery and cheating.”