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SW Corp. keynoter Feldstein Expect double dip recession
DALLAS (10/1/09)--Although recent data has brought hopeful signs to the economy, credit unions can expect a recovery that will be difficult to sustain, according to Harvard University Professor of Economics Martin Feldstein. Feldstein will be a speaker at Southwest Corporate FCU's 32nd annual Economic Forum Oct. 27-28 in Dallas. Credit Union National Association (CUNA) Chief Economist Bill Hampel and others will also speak at the forum. "This recovery is very different from a normal business cycle, so results cannot be interpreted like a normal business cycle," Feldstein said. "Recent economic improvements have been driven by fiscal stimulus and special programs. Consequently, I think this recovery will run out of steam next year, and we'll see 'double dip' recession." His presentation at the forum will explore the reasons why he believes the recent economic upswings are only temporary. Feldstein is a member of President Barack Obama's Economic Recovery Advisory Board. He previously was a member of President George W. Bush's Foreign Intelligence Advisory Board and was President Ronald Reagan's chief economic adviser. He also served for nearly 30 years as president/CEO of the National Bureau of Economic Research, a private, nonprofit research organization specializing in the American economy. To solidify the current economic recovery, said Feldstein, the Obama administration must deal with two hurdles: bank balance sheets and downward pressure on real estate prices that comes from the foreclosure process. "The administration recognizes the problems but doesn't have policies to deal with them effectively. That's going to increase risk going forward," he said. He indicated that the real estate market's woes may not be over. "About one-third of existing home sales today are the result of defaults and foreclosures. I don't think we've seen the end of declining home values," he said. "And commercial real estate may be the next big disaster. Banks are not going to be willing to roll over loans to commercial investors, so defaults are likely to increase." The Federal Reserve will face challenges in trying to keep a lid on inflation, Feldstein said. "The Fed has played a non-traditional role over the past year--issuing credit--and the effect has been to put a lot of extra cash in the bank. The question is: 'Are there going to be problems with inflation in undoing that?'" He acknowledged recent positive indicators in industrial manufacturing and housing, but suggested that the consequences of a fiscal deficit that is 5% of the gross domestic product will be a slowing of economic growth and a rise in inflationary risk. "The fiscal deficit is much bigger and much worse than any we've seen," Feldstein said. In addition to Feldstein and CUNA's Hampel, other speakers will include financial experts Marci Rossell, former economist at the Dallas Federal Reserve and former chief economist at CNBC; William Ford, former president of the Federal Reserve Bank of Atlanta and former American Bankers Association chief economist; Gigi Hyland, National Credit Union Administration board member; Charles Idol, Southwest Corporate consultant and credit union industry economist; and Phil Gramm, former U.S. senator from Texas. Early bird registration will end Tuesday.
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