The United States is likely facing years of lagging growth as the country continues to try to get its financial house in order, the Alaska Permanent Fund Corp. Board of Trustees and other Juneau investment professionals were told Thursday.
“We have a pretty cautious outlook for the U.S. Economy, said Goldman Sachs economist Sven Jari Stehn.
And that’s the optimistic view, said the member of the firm’s New York-based U.S. Economic Research Group.
There is “some clear downside risk,” Stehn said. “The risk of recession is about one in three, if not a bit higher.”
Stehn was one of three economic experts who came to Alaska to address the corporation’s Economic Forum Thursday at the fund’s Goldbelt Building headquarters.
Joining Stehn on the forum panel were John Graham of Rogge Global Partners and Ron Temple of Lazard Asset Management.
In the audience were staff from the Permanent Fund, the Department of Revenue’s Treasury Division and other local members of the financial community.
Michael O’Leary of Callan Associates, an advisor to the board, moderated the panel.
Rogge’s Graham wasn’t much more optimistic. The country is having more difficulty in coming out of the recent recession than was anticipated, and will continue to face challenges, he said.
“It’s the weakest recovery since World War II,” Graham said.
“The de-leveraging has just begun,” he said. “We have long way to go in de-leveraging.”
Lazard’s Temple said that would continue to be painful for the economy.
People borrowed too much money without the ability to pay it back, he said. The amount of consumer borrowing has been cut in the last few years, but more than half of that reduction came from defaulting and write-offs, not from being paid off, he said.
“The consumers and the financial sector had binged on debt for years,” he said.
Graham acknowledged his own industry’s role.
“We gave money to people who had histories of not paying us back,” he said.
Temple said there are still houses being foreclosed on, and until the home surplus is out of the system it will hold back the economy, and it won’t be easy to work through.
“We think it will be another six years before we get rid of the housing overhang,” he said.
In part, that’s because lenders are now requiring significant down payments, which they didn’t do before.
Graham, who focuses on international bond markets, says every country deals with financial issues differently.
In the U.S., a brief period of budget surpluses led to tax cuts, but countries such as Canada, Australia and Norway reacted much differently, sometimes creating sovereign wealth funds such as the Alaska Permanent Fund.
“Australia built a Future Fund instead of having tax cuts,” he said.
Stehn said his firm’s projection was for 2 percent growth in the year ahead, but that it would be 3 percent if not for the government’s own de-leveraging as it tries to deal with the federal debt.
Either spending cuts or tax increases will act to limit the economy by acting as a drag on the economy, although fiscal or monetary stimulus might minimize that impact.
A budget deal that provides for future cuts after the economy rebounds may be the way to go, he said.
And various members of the panel said additional threats to the economic recovery could come from political deadlock in the United States, spillover effects of the European debt crisis, or surprises out of China.
Temple though, said despite aversion in Washington, D.C. to taxes, they were going to have to be combined with proposed spending cuts to prevent too much harm to the economy.
“You have to solve the problem from both sides of the equation,” he said.
One positive note was none of the economists saw inflation as much of an immediate threat.
Continued depressed housing prices would also hold down rents and inflation, all agreed.
“We think inflation will behave quite benignly over the next couple of years,” Stehn agreed.
• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.
Comments (27)
Add commentRepublican leadership and
Republican leadership and Republican corporations both are withholding Trillions from our economy because these individuals want Pres. Obama to fail.
As for Juneau and Southeast AK economy:
Both Sarah Palin and Sean Parnell did a similar spiteful thing to our economy here when they moved 300+ state Government jobs out of Juneau.
Gov. Sean Parnell should have returned by now at least half (if not all) of these state government jobs that he and Sarah Palin moved out of Southeast Alaska to Anchorage.
withholding trillions!
What is a Republican corporation?
I am guessing the writer is talking about revenue for the federal government. I think legitimate, real republican AND democratic leadership want a balanced budget.
And, talk about withholding trillions, whenever I see the name "goldman-sachs" I feel sick...!
Goldman Sachs defrauded their
Goldman Sachs defrauded their clients, lied to congress and caused our economy to crash and we are actually hosting one of Sachs economists?
http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20...
1. Citigroup $526B 2.
1. Citigroup $526B
2. JPMorgan Chase $414B
3. Wells Fargo $112B
4. General Electric $82B
5. Microsoft $53B
6. Google $39B
7. Oracle $29B
8. Apple $28B
9. Johnson & Johnson $27B
10. Pfizer $24B
11. Chevron $18B
12. Coca-Cola $14B
13. Intel $12B
14. IBM $12B
15. Exxon Mobil $10B
16. Walmart $9B
17. Schlumberger $5B
18. AT&T $4B
19. Procter & Gamble $3B
20. Philip Morris $2B
Read more: http://www.nypost.com/p/news/business/hoarding_cash_Yzfk2c8aK1wAPrZCRdEV...
Comments
Corporate boards have a fiduciary responsibility to maximize shareholder wealth. Therefore they should go to jail if they invest corporate money for any purpose that does not maximize return.
The economic outlook described in the article is a direct result of policies of President Obama. If the United States should ever elect a president who wants to destroy the country that president would do exactly what President Obama has done for the past 3 years. If Obama is not out to destroy the US then he is completely stupid. The disdain Obama's wife has expressed for American likely reveals the real story.
People who voted for Obama believed he would stop the wars. Instead he has remained exactly on the path of his predecessor, and no one believes the war can be won yet fine Americans die every day in war. There was an expectation that he would change Wall Street but instead he is in deep debt to Wall Street for campaign contributions, including contributions filtered through Hollywood (including Goldman executives by the way). There was a belief that Americans would be put back to work but instead more people are on welfare and working for government than at any time since the end of WWII. The trade deficit, the national debt, the entitlement deficits, and the huge difference between production and consumption have all grown to unprecedented levels since Obama was elected. Is anyone who voted for this terrible president not now contrite?
kalf, I have a question for
kalf, I have a question for you, if you can quit raging for a minute over republicans. Have you ever run a corporation or any business for that matter?
I thought not. What do you expect a corporation to do with all this uncertainity in the economy? That's right, they're sitting on their money. Just like the ordinary citizen. Are you out spending every last cent you make, if you're lucky enough to have a job? Not me, although it's getting harder to know what to do with the cash. Under the mattress maybe, for now.
First thing I'd ask these "experts" is who they voted for in 2008. They sound a little Keynesian to me. Were they wearing Obama in 2012 lapel buttons?!
They say, "Either spending cuts or tax increases will act to limit the economy by acting as a drag on the economy, although fiscal or monetary stimulus might minimize that impact."
Umm, we've already tried the stimulus twice. It didn't work.
Then they say, "Continued depressed housing prices would also hold down rents and inflation." I would say that rents will continue to rise. People have to live somewhere when they can't buy houses. Supply and demand on rentals?
And finally they say, "additional threats to the economic recovery could come from political deadlock in the United States". That's just tired, overused rhetoric from the left. The Democrats had complete control of the entire government for 2 years and all they could do was ram through BOCare and more onerous regulations. They couldn't even produce a budget, so cry me a river on the "political deadlock". Republicans control half of one branch of the present government.
Maybe the Permanent Fund should find some new investment advisors that have a more conservative ideology. I wouldn't trust these progressive economists.
Point to make to Calypso
The context of these people coming to town is that they came to take credit for the over 20% rate of return for the fiscal year just recently ended. So they are taking a victory lap around the track. They typically make personal salary and bonus incomes of well over $1 million in a good year (like this one) and they didn't get to where they are by being stupid. So they will work 100 hours a week to make sure they get a victory lap when everything has worked out well for the client that pays them. Yes, they do tend to be left-leaning people but at least this year they are unlikely to be fired.
@calypso & glacierdogs
PLease take a breath and realize that the wars started by GWB have NEVER been on the winning end! The problem is once we got over there we couldn't just leave. Congress on both sides are responsible for the economic problems that the US is having. PLEASE DO NOT blame Obama for all of it
Credit:
So who gets the credit for the death of Osama Bin-Laden and just today in the news the death of Anwar al-Awlaki. Would that be BO or GW? Just curious Billb.
$1 billion
The wars in Iraq and Afghanistan cost taxpayers $1 billion/week.
We've been spending this cash like drunken sailors, making Halliburton rich, while soldiers die. THIS is the real reason we are bankrupt!
Yet, no one can tell me who we are fighting, who the enemy is, and how this makes us safer.
The current economic crisis was started by the Cheney/Bush war machine in 2001. History will show that.
@Milspec
GWB tried for 7 years to find and kill Bin-Ladan with NO progress! Obama found and killed him in 3 years
@glacierdogs - I'm not sure
@glacierdogs - I'm not sure they were taking a victory lap. It sounds more like they were giving residents a heads-up on how bad next year could be.
@bill, BO had nothing to do with finding bin laden. Give credit where credit's due - that would be our generals and soldiers. I'll bet you a Starbucks BO couldn't even find Pakistan on a map.
jo says, "Yet, no one can tell me who we are fighting". That's the damm problem - we're up against an ideology. It's like no other war we've been involved in. Then add to that the pc nature in which we have to fight our battles now days and we could be over there forever. Better there than on our soil, I say. Historians will have a heyday with this endeavor.
Halliburton? Find another corporation to vilify, that one is so yesterday.
jo, while you're on the subject of wasting taxpayer money, what do you have to say about Obama and his "green energy" loans? As far as I could find, he's up to $17B so far, in 2-1/2 years. Oh, update as of 9:54 pm today - $5B more in loans approved. That's $22B that we're borrowing from China, without any hope of a return.
Are you liking the pay-to-play aspect of those loans? Hopefully, the Congressional investigations will land certain people in prison.
@Calypso
You are a bigoted , up type ,constipated person that will NEVER admit that you and the Republican party are responsible for most of ,not all, of the problems that we are having today. You probably identify with that Senator from Kentucky that looks like he is constantly constipated
@bill - feel better now?
@bill - feel better now?
Name calling = end of discussion.
Well done.
@Calypso
If you can't take the heat in the kitchen get out! You and your Republican cronies have done NOTHING but disrespect Obama since he took office. YOu have consistently called him names and disrespected the office of Presidency
My Obama pom-poms....
My Obama pom-poms seem to have fallen onto the floor.
millspec, who gets the credit?
... for Osama bin Laden's death?
maybe Benazir Bhutto knew?
http://www.associatedcontent.com/article/543321/did_benazir_bhutto_state...
_______________________________
"In a November 2, 2007 interview with Al-Jazeera TV, Bhutto spoke English and told correspondent David Frost that Osama bin Laden was dead and the person who killed him was Ahmed Omar Saeed Sheikh."
_______________________________
If this is true it says a lot more about our government than it does about Osama bin Laden. We must seek the truth before assuming anything. If it is not true why would this woman lie about a thing like that? Was it a real interview? Did she really say it or not?
How about leaving?
Did we win in Germany? How about Japan? Is Bush keeping us there? How about obama? Perhaps he could bring all the military personel home? OR, does he still have to consult with Bush? Hel, we have to hitch hike on a Russian road to reach the space station, and you guys think the axcess road is expensive!
For those of you who don't
For those of you who don't understand what corporate fiduciary responsiblity is, perhaps you should research it a little and see how it applies to our current situation. Here's the breakdown: corporations with shares that are publicly traded are legally required to do all that is in their power to increase the value of their shares for their shareholders. If a publicly traded business does not do all that is in their power to increase shareholder dividends, that company can legally be sued by its shareholders (and many have been successfully sued by shareholders in the past). This means that businesses with publicly traded shares are required to grow exponentially. That is why you see big box stores in every town you go to. More stores = growth. That is why you see jobs outsourced to India, Vietnam, El Salvador, etc. Cheaper labor markets = growth. That is why employee benefits packages are renegotiated and reduced. Internal savings = growth. That is why some businesses dump toxins into the environment and pay the corresponding environmental fines. It's cheaper to pay the fine than it is to develop responsible technology to dispose of waste safely. Environmental externalities = growth. Growth = increased shareholder dividends.
Initially, this system benefited the average American. But today, this system is outdated and needs reform as it operates in a globalized economy. It's not difficult to see that an economic system in which businesses are legally required to grow exponentially while operating in a world with finite resources is unsustainable. The system won't last under its curren design, and we're seeing the grumblings of its unsustainability right now. It would behoove politicians and economic leaders who consistently shout about "responsibility" to acknowledge this fact and start working on reform now. It would demonstrate genuine ladership and foresight.
Unfortunately, a lot of us are far more concerned about getting our share than we are about doing our part, and thus the real problems are ignored and prolonged. Until our leaders mature and remember the sense of responsibility and sacrifice that made our newborn country great, we'll just continue to see these same arguments and same low to middle class folks choking to stay afloat.
Of course those operating within the broken system will rail against this, because they're unable to imagine any alternatives. But find out for yourself. Read up on fiduciary responsibility and its long term ramifications.
comment to Southeastfood
I cannot diagree with your characterization of fiduciary responsibility, and a corporation need not be publicly traded for your description to apply. However, if you think that government should step in and change the environment such that economic players (such as big-box retailers as you cite) change their behavior then I must comment that government merely screws everything up to be far worse than is the case when government stays away. Let the markets sort out any needed change. Government is inept and corrupt, and that has never been more true than it is right now.
The Constitution
...is part of our government, therefore you consider it inept and corrupt too. Just say it - you hate America.
@Lattitude58
WELL STATED!!!!!!!
Bin Laden
First, Obama did NOT find Bin Laden. Our American soldiers did that. Obama has shown nothing but disdain for our troops. Second, the buyouts did nothing but plunged us deeper in debt. If the everyday American citizen cannot pay his or her bill, no federal agency is standing by, waiting to bail out the person. And the threats of taxing the middle class if the current stimulus does not go through? A tad bit childish I must say. Stomp stomp whine whine. The endless regulations our congress has allowed the Obama administration to pass is strangling our country. These regulations are something the Americans have no knowledge of nor a chance to vote on but are pushed through, i.e. EPA. Only a clean sweep of Washington D.C. - of ALL parties is going to bring our country back on track.
Killing terrorist leaders and
Killing terrorist leaders and regulating the economy are two very different things, one of which the president has very tight control over and the other he has much less control over than we generally assume. One of those is also a very complex system that is slow to react, and can manifest the consequences of policy or events years down the line.
So most of you need to stop commenting here and instead read a freaking book or two. Every time I read comments like these I hope just a little more that an asteroid will hit the earth and wipe us all out, because really, you're providing a very strong argument against our worth as a species.
I also hear many of you going on about government screwing up everything it gets into, which is also really stupid. We hear about it when government (or anyone, really) screws up because it's interesting, but you never hear about what it doesn't screw up, which is most things it's involved in.
Don't believe me? Go ahead and eat some delicious, unregulated Chinese noodles. The lead gives it extra flavor.
The Supreme Court
...is a part of the government. So are the Navy Seals. And the Coast Guard. And the FAA traffic control guys. And the Centers for Disease Control. All corrupt and inept.
Oh, not all of them are, you say? Only the parts of government that you and your pal Rush don't like. I see.
Actually
...the CIA found Bin Laden, not our soldiers. The same CIA that your tea party masters, the Koch brothers, want to abolish.
lat58
take a pill. Are you off your medication?