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Day with the Superintendent

The Economy of the Next Decade: A New Normal for Rural & Urban America?. Day with the Superintendent Ernie Goss Ph.D. Professor of Economics, Creighton University, MacAllister Chairholder www.twitter.com/erniegoss Websites: www.ernestgoss.com www.outlook-economic.com

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Day with the Superintendent

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  1. The Economy of the Next Decade: A New Normal for Rural & Urban America? • Day with the Superintendent • Ernie Goss Ph.D. Professor of Economics, Creighton University, MacAllister Chairholder • www.twitter.com/erniegoss • Websites: • www.ernestgoss.comwww.outlook-economic.com • Podcast: Itunes http://coba3.creighton.edu/econoutlook/goss-rss3.xml

  2. Debt/Savings Trade/international Value of $, Inflation, Interest Rates & Exports D.C. Uncertainties

  3. Uncertainty

  4. U.S., and Iowa Job Growth 2000-10

  5. D.C. Uncertainties • Health care reform & taxes to pay for program • Cap & Trade & taxes to pay for program • Making home affordable program • Cash for “clunkers, appliances, caulking, etc.” • Another stimulus program? • What is your bra size? 34B & above? • End of 2001 & 2003 tax cuts • 2 stimulus packages, TARP, auto bailouts, AIG, etc. = $2,000 billion - $3,000 billion

  6. Trade & Value of Dollar

  7. U.S. & Iowa Export Growth, 1999-2009

  8. Chinese manipulation of dollar • By buying $1.0 Trillion+ in U.S. Treasury bonds, Chinese have pushed dollar up in value • Has meant lower U.S. inflation • Has meant lower U.S. short & long term interest rates • Forcing the Chinese to float their currency would mean higher U.S. inflation & interest rate. • It would mean a significant boost to farm income (12%+).

  9. Bullish on Agriculture/food, Energy & Stock Market: Long term • Fast growth for emerging economies (China, India): Food & energy demand income elastic (e.g. income up 8%, food demand up 12%) • Cheap value of dollar (makes U.S. food & energy more competitive abroad): U.S. trade deficit, budget deficit, higher inflation. • Biofuels & alternative fuel production: wind farms, ethanol, solar.

  10. Public Debt

  11. U.S., Greece & Great Britain Public Debt, 2010

  12. U.S. Interest Rates on 10-Year bond, 1960 - 2010

  13. The Mainstreet Economy • A monthly survey of community bank CEOS • Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Wyoming • Intended to gauge the economic conditions in the non-urban areas of region • Average community size is 1,300 population • Available at: • www.outlook-economic.com • www.economictrends.blogspot.com

  14. The Rural Mainstreet Economy(index over 50 indicates expansion)

  15. Rural Mainstreet Economy, 2007-10

  16. The Regional Economy:Survey of Purchasing Managers& Business Leaders • A Partnership Among Creighton, and State Supply Managers Associations

  17. Monthly Survey of Business Conditions • Leading Economic Indicator • Released First Business Day of Each Month to Media • Released Via WWWeb: • www.outlook-economic.org • www.ernestgoss.com • Appears in media throughout U.S. • Survey of supply managers in over 900 firms

  18. U.S. & Mid-America PMIs, 2007-10

  19. U.S. & Mid-America Price Indices, 2003-10

  20. Economic Medicine:>Make 2001 and 2003 tax cuts on dividends & capital gains permanent>Reduce Gov. spending to less than 20% of GDP> Reject lifting the cap on taxable social security wages>Artificially supporting the dollar is a losing proposition>Reduce barriers to trade>”Draw a line in the sand” bailouts are over

  21. Important indicators: keep an eye on: • The employment report for April will be released on May 7th . I expect the report to show job gains but less than 100,000 with no change in the unemployment rate (9.7%) (www.bls.gov). • First time and continuing claims for unemployment insurance. Released every Thursday. First time claims above 460,000 will be bearish (www.doe.gov ). • The first and most important indicator for May will be the Mid-America and U.S. January PMIs released May 3rd .( www.outlook-economic.com and www.ism.ws ). Another increase will be very bullish. • Keep an eye on the yield for 10-year U.S. Treasuries. If this yield approaches 4.0% within the next month the Fed will be “between a rock and a hard place.” The rapidly rising yields reflect: 1) Concerns regarding the large increases in the U.S. budget deficit, 2) Rising inflation expectations (but not a large factor yet) and 3) Investors reduced the risk perceptions and are pulling money out of treasuries and putting it into equity markets (a good thing) (http://finance.yahoo.com ). • Investors will be closely watching the value of the dollar, especially against the Euro.

  22. A New Normal? A Trifecta! 1) Higher taxes, 2) inflation rates, 3) interest rates. Less $$s available for consumption (taxes higher) China allows Yuan to rise in value—cheap dollar, upward pressure on U.S. prices. Federal Reserve keeps interest rates higher Businesses & government must move to defined contribution plans & away from defined benefit plans

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