The New Rock Stars (Economists) & 1 Song Being Sung
There are certain words you never hear used together in the same sentence. "France" and "ideal call center location" is one example. "Bank" and "consumer benefit" is another. And then there are classics such as "economist" and "A-List party invitee."
That last one is no longer proving true. Economists have become the celebrities du jour. Ironically, the same deep recession that only a few foresaw (remember the "soft landing?") has become the catalyst of popularity for the many. Economists, who were formerly relegated to sparsely attended, post-lunch breakout sessions at credit union conferences, are suddenly morning-of-day-one general session presenters. And if your supply-side isn't on the dry side, you're keynoting meetings, and your own personal economy is likely well on the road to recovery.
Dr. Barry Asmus is among those economists to whom decision-makers are turning as they look for the light (Candle? Match?) out of the darkness. Asmus (you can find more at barryasmus.com) was already one of the country's most frequently requested speakers before the economic downturn. An author and senior economist for the National Center for Policy Analysis, Asmus offered his own brand of insight during PSCU's recent annual meeting in Orlando, Fla., where he demonstrated that the words "entertaining" and "economist" can actually be typed in the same sentence and not prompt a question from Microsoft Word.
Unstoppable Trends at Work
Asmus, an avowed free market thinker, noted there are several, far larger and "unstoppable" trends at work beyond the current recession. The first is what he calls the "tremendous lessons of history." Asmus noted there was essentially no economic growth on earth from the beginning of human civilization through the year 1500. That all changed when the Magna Carta began to lay the groundwork for private property rights, Protestantism emerged and gave respect to entrepreneurs and merchants and the "work ethic," and John Locke's writings became influential.
Those factors helped to create "space for freedom" in Western Europe and later, America, said Asmus. Karl Marx' influence, including his work, "Das Kapital," in India, China and numerous other countries helped stymie growth there. Now, he said, the 21st century will mark the "rise of the rest" of the world.
Asmus' second unstoppable trend is the "Power of An Idea Whose Time Has Come." The National Center for Policy Analysis publishes a much-cited "Index of Economic Freedom" each year that examines 165 countries. "Fifteen years ago 15 countries were rated as free or mostly free," he said. "Today, 87 countries are free or mostly free."
"Freedom's time has come," he said."
The third (unfortunately) unstoppable trend, according to Asmus, is the "Shockwaves of Government Mistakes."
"In a market system," observed Asmus, "if an individual makes enough mistakes, he is out of the system. But when the government makes mistakes, the shockwaves can last a century."
He pointed to the moves by the U.S. government in the 1930s to respond to a sinking economy by raising taxes and tariffs. Some lessons were learned, he said, but not all have been remembered. "Let there be no doubt: the bomb that destroyed the U.S. economy was detonated on Wall Street, but it was made in Washington, D.C.," he opined.
Asmus said the post 9/11 reaction by the Federal Reserve to pump liquidity into the economy was a good move. Continuing to keep rates low and pump additional liquidity was not, he said. "Borrow and buy creates bubbles, and there were bubbles everywhere. The Federal Reserve would not take away the punch bowl."
He criticized the idea that homeownership should be for everyone, even those who "can't afford a home," and pointed out that by 2007 there was nearly $5 trillion in subprime mortgages in the U.S. "This is close to insanity," he said. "Even if all the home prices had gone down just 5% all the subprime was underwater."
In remarks that hit close to home for credit unions and their corporates, Asmus said of the recent changes in mark-to-market accounting rules by FASB, "I like mark to market, but not when there is no market to mark to. Mark to market makes no sense. I can't tell you how I'm breathing a little easier having this assinine rule revoked. Mark to market was the biggest liquidity bubble on earth." (For a different viewpoint, see page 10.)
So what about the big question, the reason economists have become a rising index - when will the current recession come to an end and life get back to "normal?"
Like others, Asmus believes the current recession will hit its floor in 2009 and the U.S. and world economy will begin to recover in 2010.
The Big Question About Credit Unions
While Asmus spends much of his time on macro-economic and global issues, he also sees strong opportunities for credit unions in the U.S. in the current economy.
"This is an interesting time for credit unions," he said. "If your largest competitor is banks, you must ask what it is that has made you different from day one. No. 1 it is the principle that everyone is in this together. You are a 'member.' Service is your competitive edge; what about leveraging your members to be better spokespersons for you? What an opportunity to say what you're all about. This is the time to get marketshare like you've never gotten before. There is a lot of mistrust of financial institutions that are 'too big too fail.' It's in these times where we really create something."
Frank J. Diekmann can be reached at firstname.lastname@example.org.