Economists speaking at the Insured Retirement Institute (IRI) annual conference said that America’s economy and the global economy are headed for a “fundamental paradigm shift” as the two stabilize[1]. “Rich countries are running deficits…and liabilities,” explained CEO of PIMCO Mohammed El-Erian, while “GDP in developing nations tend to stay in positive territory during periods of turbulence.” He added that high unemployment numbers in the United States are not really that unusual, but that they have remained so high is a cause for concern. El-Erian said that the entire economy will need a “’Sputnik’ moment to jolt [it] out of its inertia,” and suggested that not much will change until something happens to anger constituents enough to demand that policymakers do something.
Another economist, Fareed Zakaria, foreign-policy expert and editor-at-large of Time magazine, said that pretty much all of the current administration’s attempts to repair and restore the economy are “misguided.” He explained that “businesses are not hiring for a very simple reason…If there were consumer demand you would see businesses hire”[2]. David Kelley, JPMorgan Fund’s managing director, agreed, saying that “buyers aren’t buying” and that is why America’s economy has a problem.
Interestingly, the economists did not necessarily think that the housing slow-down was a primary symptom of the economy’s problems. Instead, they attributed it, at least in part, to a “healthy economy phenomenon” in which Americans are “getting their personal finances under control.” However, until lending loosens up, that healthy move will not ultimately benefit the economy, said Kelly. Washington’s actions indicate that banks should stay strict and rein in risk, he said, adding that “it is making this recovery much slower than it needs to be” and “if you don’t take some risk, you’re not doing anyone any good.”
Kelly also believes that the Federal Reserve’s commitment to keep interest rates low until 2013 is encouraging businesses to put off important investment decisions since they know that lending rates will be good for a while. “To help us,” he said, “they need to talk about raising rates.”
Do you agree that our economy will never be the same?
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[1] http://www.bankinvestmentconsultant.com/news/iri-national-conference-economists-2675494-1.html?ET=bankic:e4152:2148529a:&st=email&utm
[2] http://www.investmentnews.com/article/20111004/FREE/111009980
Really interesting article. I enjoy reading your thoughts. I belive Zakaria is right; the problem is lack of demand for products and until people have enough diaposable income to buy things, the economy will remain stagnant
As long as we have an out of control Fed, an out of control overspending government, it will stay down! We only have so much money as a country, printing more does not actually count, and with too much of it being spent on wasteful government overspending, the economy is going to have an extremely hard time recovering, if ever!
Kelly is wrong about the low interest rate discouraging business, he needs to look at the uneasiness business is having with the ton of upcoming regulations, regulations that will take large sums of money to comply with. Those companies that do not have large reserves available to comply with all of the new regulations will perish, either from lack of funds, or from government fines and edicts! It is already a huge burden to pay all of the fines levied for even small transgressions of the current regulations. It is common for a $25.00 mistake to trigger a $1,000.00 fine! Do the math on that, and those are some of the smaller fines they are issuing against business, with no real recourse to protest against the fine!
Any business person worth their salt sees this as a serious problem, those who claim otherwise are lying or destined to be out of business soon. How many small to medium sized businesses can suffer very many fines of this size or bigger?
Mr. Kelly needs to get into the trenches and learn some of the real reasons for much of what is keeping our economy slow, and making it harder every year for the United States to compete globally!
We have the most productive workers in the world per manhour, but that is not enough is the taxes and regulations keep us from being able to compete!
The money the Fed is putting into circulation is nto staying home and into people’s pockets in USA. It goes to oil producers, China and other foreign countries. Most of the goods we use and buy are not american made but foreign made.
Our government and institutions at all levels are strangling us and constricting creativity with all the impossible rules and regualtions us humans have to comply with.
Her eis a example-in our small city of Hermosa Beach, CA, south of LAX airport, The city council wants to ban all cigarette smoking and sale of tobacco products. These kinds of restrictions and affront to our freedoms and liberties are being done at all levels of government and institutions. There are just too many do- gooders that want impose their wills on society. I think Ron Paul may be on to something. he may be only one worth voting for but even he won’t be able to effect the self serving powers in existence. Our standard of living is going down and will continue to do so unless we repeal many laws and change our ways. We going be stagnant for the foreseable future-like Japan and Greece.
We need repeal most of Bush’s laws especially the Patriot Act. We need shut down TSA and allow people to travel without hindrance or Xrayed or interrogated by TSA employees.
We need stop all the wars we are engaged in- War on terror, war in middle east, war on drugs, war on fat people, war on smokers, war on guns, war on parking meters, war on smokers. Stop all Wars.
How come we have lots homeless people and so many foreclosed homes around lying vacant.??
Our politations and leaders at all levels have failed us all and we need fire them all. We need cut their pay and pensions. All lways should have a expiration date of 5-10 or 20 years, max. Then they can be voted on by the people to renew or revoke them.