Economic Outlook: How long is recovery in a ‘Humpty Dumpty’ economy?
It’s a shock because for the last 11 years, the United States has been “throwing money out of a helicopter,” Aleman jokes as he shows a “Helicopter Ben” Ben Bernanke action figure in a helicopter with the slogan, “Now YOU can drop money out of a helicopter.”
The “cash is king” will remain the economic mantra, Aleman notes. “It’s very difficult to get a loan now,” he says. “You have to have a job, you have to have 20 percent down…Banks are turning away customers. They don’t want their money…because lending is no longer a business.”
Aleman refers to the Federal Reserve balance sheet as a “monetary tsunami.” During economic times like this, the Federal Reserve lowers interest rates to reflate the economy. It did this during the last recession, Aleman says, and only one sector reflated: housing. “That bubble burst and we went into a recession,” he says. “That’s where we are now.”
Although new home sales are very depressed, interest rates are at an all-time low, and credit-card lending “is non-existent,” there are some signs of stabilization, Aleman says. “The good news is that the economy is growing,” he points out. “Manufacturing has expanded for the past two years. The service sector is in expansion mode.”
Aleman is also confident that the he housing market, which sets the tone for much of the construction market, will come back. “Home prices are going to come back,” he says. “Don’t ask me when, but they will. We can’t outsource home buying to China so it has to come back.”
A tricky balance
At Better Roads press time, U.S. Sen. John Cornyn (R-Texas) was calling on Congress to adopt “a strong balanced budget amendment (BBA) to the Constitution.” Cornyn, a member of the Senate Budget Committee, says a strong BBA “will treat the disease along with the symptoms. An amendment with too many exceptions and loopholes will not.”
In the Nov. 16 speech before the Heritage Foundation, “Balanced Budget Amendment: Reclaiming Control Over America’s Future,” Cornyn asked the difference between the fiscal challenges the nation’s founders faced and the ones we currently face and then quipped that “the answer is pretty simple.
“Back then, federal government was the solution to the problem. Right now the federal government is the cause of the problem. And the American people understand the difference.”
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