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When will the recession end?

12 July 2010 No Comment

by Helen Kaiao Chang

See original story on SDNN

Wednesday, April 22, 2009

It’s a question that people ask, when thinking about business, the economy and just life. When will the recession end? No one really knows.

But we asked eight experts in their field: economists, investors, business leaders, an academic, a farmer, a woman who lived during the Depression, a veteran and even a psychic.

Here are their predictions.

“…when new home sales increase…”

Alan Nevin
Economist
MarketPointe Realty Advisors

“Recessions typically end when new home sales increase.

“There is a strong correlation between the production of new housing and the health of the economy, because new home production has an economic multiplier effect twice that of virtually every other industry. In a typical economic environment, there are four to five re-sales sold for every new home. Those sales create an enormous spending machine for home furnishings, landscaping and the myriad of other expenditures that bolster retail expenditures.

“It is most important for the populace to have confidence in the economy and to sense that it is moving forward. Unfortunately, the program the current administration is proposing does little to bolster that sense of confidence because it does not generate funds that directly flow into the hands of businesses or households, and does not result in the loosening of credit.
“Until credit is loosened, we will have a situation akin to the 1974 to 1975 recession that was created when the money supply was tightened. Once the supply was loosened, the economy recovered very nicely. Like most of our economic cycles, they are guided by the confidence level of the population, as two-thirds of the gross domestic product (GDP) is generated by consumer spending.”

“…time to do transformational things…”

Julie Meier Wright
President and CEO
San Diego Regional Economic Development Corporation

“The end of this recession is much harder to predict because it occurred on many fronts and is global. In the early 1990s, the recession in California could be clearly traced to defense budget cuts. What I focus on instead is using this time to do transformational things that will ensure San Diego’s competitiveness as the recovery begins, whether in 2009 or 2010. That was what Pete Wilson did as governor, and he was able to take a record deficit in 1991 of $14.8 billion and leave his successor a surplus.

“San Diego is blessed with 21st-century industries and if we create the proper business climate for them to flourish, we can come out of this stronger than ever.”

“…credit system must be repaired…”

Raford Boddy
Emeritus Professor of Economics
San Diego State University


“This recession will end in April 2010.

“For the recession to end, the credit system must be repaired. Securities related to subprime, residential mortgage-backed assets held by the big banks must have ongoing current prices, or they must be removed from the banks’ balance sheets. Taxpayers will demand that any government purchases of toxic securities reflect current house prices. Banks counter that current prices are too depressed and imply that they will not sell securities at such prices.

“Scenario 1: If the Treasury sets prices to reflect current security values, I believe the credit system can be repaired in nine months. Stockholders of some big banks are likely to lose all their equity. Congress may agree to make them partially whole. Taxpayers may begrudgingly assent.

“Scenario 2: If the Treasury agrees to security prices above current market values, Congress will balk. The political stalemate and credit malaise will drag on until spring 2010.

“In the meantime, foreclosures will continue to grow and housing prices will fall even more. I think the first alternative is better, but the second is much more likely. That is how I got to April 2010.”

“…a historic buying opportunity…”

Robert Campbell
Author, “The Campbell Real Estate Timing Newsletter”

“There’s going to be a historic buying opportunity in real estate. Based on historical patterns, I think that it’s going to be in late 2011, early 2012.

“If people have prepared themselves for this, they should be clapping their hands everyday, saying ‘I can’t believe what great bargains are going to be available to me at the bottom.’

“The good news for the sake of this country is the fact that the average price home in San Diego got up to $600,000, with a one-to-four ratio for income-to-price of a house. Most people would have (had) to be making $150,000 a year to afford a home. Now we’re going through that adjustment period. That gives everybody a fresh start and allows the system to reset.

“If you go back and study cycles for the last 100 years, it’s clear that until the real estate market recovers, you can’t expect a recovery to occur in the real economy. The economy will start to recover when real estate prices hit bottom. It’s more a function of pricing than it is of time.

“What people should be doing right now… is generating as much cash as possible and avoiding practically all asset classes – the stock market, the real estate market – and getting themselves into as strong and liquid a position as they can. So when the turnaround does occur, they’re prepared for it.”

“…things will get somewhat worse…”

Genie Watson
San Diego resident since 1955, born in 1921, grew up on a farm in Puerto Rico during the Depression.

“(During the Depression), my parents lost their savings and struggled to keep the farm. All the siblings stayed at home longer to work the family farm during the hard years.

“(Now) as a retired person who owns their own home, I feel much less affected and vulnerable. But I do see that many people are in dire straits. I think things will get somewhat worse and then they will get better – they always do.”

“…great opportunities…”

Enrique Mier y Terán
Chairman
SafeMex, a travel assistance service in Tijuana

“I think we’re in for at least more than a year of the downturn. But, because of the fall in the peso, there are great opportunities to provide medical services, tourism and retirement homes to U.S. residents.
The maquiladoras (foreign-owned plants in Mexico manufacturing goods for the U.S. market) are experiencing unemployment, but also some growth and expansions. Companies need to continually lower their costs … and now all of a sudden, they have a much better prospect in Mexico.”

“…foot on the throttle… “

T George Harrison
Army veteran and former Time magazine editor

“In World War II, I volunteered into the Army at 17, landed on Omaha Beach as a sergeant and was commissioned an officer on the battlefield at Bastogne, Belgium in the Battle of the Bulge and jeeped across Germany as an artillery observer with George Patton’s tank column.

“The surprising hero of that war was the U.S. economy that shocked our Axis enemies — by delivering such an incredible supply of tanks and airplanes in the Detroit miracle,that was a triumph of know-how and barn-raising unity.

“After the war, I covered business and economics for Time-Life-Fortune in Washington and concentrated on the Cold War’s mobilization and expansion for the economy, especially the years under leadership of [former General Electric chief executive officer] Charlie Wilson. That’s when we at Time began to compare the U.S. economy with that most noble artifact, the Stanley Steamer car, which would keep on accelerating forever, some believed, if a man had the courage to keep his foot on the throttle, after his hat blew off.

“Thank heaven, our learned Chicago friend from Harvard, President Barack Obama, knows this part of U.S. story very well and has the courage to stomp his foot on the Keynes accelerator with his $787 billion stimulus package. [Economist John Maynard Keynes advocated that governments and central banks use public spending to control unemployment and recession.] Like a national government’s obligation to defend the lives and fortunes of its citizens, so it is obliged to maintain an orderly national economy.

“My best bet is that we’ll feel the upturn in jobs by Christmas.”

“…environmental constraints…”

Al Stehley
Farmer
Stehley Grove Management, which oversees 350 acres of citrus fruit and avocado groves

“We’re speculating whether avocados are a staple or a luxury item. If people think of avocados as a staple, then it would not be a recession for us. If people think of avocadoes as a luxury, we’ll feel the same pain that everyone else is.

“We’ve got the smallest crop in 20 years right now, so we anticipate the prices will rise to balance the supply. It was a real heat spell during the flowering stage last year, knocked a lot of flowers off, so they didn’t pollinate.

“The biggest impact on ag (agriculture) right now is water. We can’t get the water south because of the environmental constraints in the Sacramento delta. It’s gonna take us 10 to 15 years to work our way out of that.

“If California doesn’t do something statewide, they’re pretty much gonna lose a whole generation of farmers.

” …look in the mirror!”

Aimee Johnson
Clairvoyant Healer
Golden Rose Psychic Services

“If we continue on our current path, the recession will end in three years time. It will end as a direct result of the upcoming shift of consciousness that our planet is undergoing.

“Look around you! We are moving from a ‘fear-based reality’ to a ‘love-based reality.’ Following the love path enables an individual to accept personal responsibility for their creations. The path of fear encourages us to pass this responsibility on to others including Wall Street and the government.

“If you need a practical guide to surviving and thriving through the next few years…. look in the mirror! Settle with yourself. It’s time for a personal responsibility check. Are you furthering the economic downfall by focusing on lack and hardship? Are you watching the ‘bad news’ on cable every night? Do you feel afraid? If yes, then you are actively contributing to the recession.

“Or are you looking for new opportunities and possibilities? Do you exert your effort to raise both your personal vibration and the vibration of those around you? Do you feel empowered and hopeful? If so, then you are helping to end the recession.”

Follow Helen on Twitter @HelenChang.

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