President’s Corner – Economy

Woody Allen once said he had become obsessed with the notion that somewhere in the world there was a person having the exact same thought he was having at exactly the same moment. He decided to call that person, but the line was busy.

There must be someone in the world that is as totally confused as I am when watching so-called analysts discuss the economy on the various 24-hour news channels. One channel will say the economy is doing great, and their arguments are reasonable and logical. At exactly the same time, the competing channel says the economy is close to recession, if not a total depression. The competing channel also gives reasonable and sensible arguments to support their position.

Interest rate forecasting is another area in which everyone has an opinion, most of which emanating from hope rather than data. My good friend Dr. Jim Likens, who is an economist and long-time board member of a southern California credit union, used to say that if he knew where interest rates were going, he wouldn’t tell any of us. The consensus of economists forecast rising interest rates in the second half of the year. What is currently happening here and the rest of the world does not support the economists’ analyses. Japan, Germany, and Switzerland have negative interest rates on some of their bonds. This drives money to the U.S. which has relatively attractive Treasury bond rates but will keep rates low because the demand for American investments exceeds the supply.

Inflation may be the most difficult to predict. Many experts (including yours truly, a noted non-expert) felt we would have rampant inflation by now. So what happens? Oil prices fell off the map, and pre-Super Bowl big screen high definition TVs are selling at all-time lows.

EconomyPredicting the future when it comes to the economy is less accurate than forecasting the weather. We’re now in a global economy. If Italy sneezes, we catch a cold. Sometimes the best thing to do is just look out the window to see what’s going on outside, and then repeat the process daily. Maybe one day I’ll call that person who I think has the exact same thoughts, and he’ll answer the phone. It should make for an enlightening conversation.

David M. Green
President/CEO
(925) 335-3802