PLANO, Texas - One of the fundamental issues contributing to a troubled U.S. economy is consumers spending more than they earn. The statement was a recurring theme in Dr. Charles Idol's recent presentation at Southwest Corporate Federal Credit Union's 31st Economic Forum.
"A basic, haunting problem in the U.S. over the last five years has been zero household liquidity. U.S. households need to increase their savings, which would improve their credit and reduce the United States' dependence on foreign capital," Idol said.
Other takeaways from the credit crisis, according to Dr. Idol, include the need to build additional criteria into mark-to-market investment accounting and the need for loan originators to retain some degree of credit exposure to establish tighter underwriting standards. Idol was one of eight financial experts who shared perspectives on the economy with an audience of nearly 500 CU professionals at the Westin Galleria Dallas.
Concerning the country's near-term economic outlook, Idol said credit unions can expect negative GDP growth over the next three quarters. He also predicted that domestic drivers will remain weak, and the export sector, which has been buoying the country, will "slow as foreign economies weaken and the dollar strengthens. In addition, the housing market will remain soft and job losses will continue, but inflation should not be a concern."
Idol forecasted a fed funds interest rate around 1% through most of 2009, with little steepening of the yield curve. He projected interest rates of 5.5 - 6% for 30-year fixed-rate mortgages through mid-year 2009.
Further, Idol put credit union loan growth at 8% for 2008 and 2009, and share growth at 8.5% this year and 9% next year.
"The financial challenges of recent months prompted a record-breaking number of credit unions to turn to Southwest Corporate's Economic Forum for answers," said Southwest Corporate CEO John Cassidy.
