NC Media Watch

A quest for reason and accuracy in letters to the editor, guest editorials and other issues of interest to the citizens of Western Nevada County.

Thursday, September 08, 2005

FED-in-Brief Notes

Today the Federal Reserve Bank of San Francisco conducted a FED-in-Brief in the Amaral Building at the Fair Grounds. This building was chosen to insure adequate space for all the potential attendees. Expectation were that many business and political leaders would attend this historic event. However, the building was too big, we could have met in any facility that could handle 150 folks, Nevada City Elks, or even the Holbrook. It is rare that the Fed comes to small communities, preferring Denver, Seattle, or Phoenix. I am not sure why more of our community leaders did not take the time to get this inside look at our national and regional economy. A smaller facility, farther away from the horse barns, could have reduce the fly population. At our table, five or six horse barn flies competed with us for our breakfast.

Dr Willie Hopkins from, CSU Chico had some advice for our community, as the baby boomers retire. These boomer are not going to sit on the front porch and watch the world go by, they are going to become a new wave of entrepreneurs looking for a nice place to live and work. He thought Grass Valley and Nevada City fit that model. Then came the BUT. We need to be prepared by, deciding what kind of community we want to be, what kind of jobs we wanted in the community, and if we will have the business land need for these new business. And, we must have the desire to prepare for these new jobs, with affordable housing and an educated work force.

According to Hopkins, California’s economic vitality was the result of a strong education system inn the 50s and 60s. An education systems that is in trouble todeay. [Comment: India and China graduates more engineers than the US. While the number of graduate engineers is growing in China and India, it is declining in the US, according to some chart I saw earlier this week.] According to Hopkins, this due to the lack of state funding, and the universities are going to have to become self sustaining profit making organizations.

Gary Zimmerman, a Senior Economist gave an over view of the national economy, a summary of the Beige Book Survey, that came out September 7th. Copy here. With one caveat, it does not include Katrina’s impact. Which is being assessed as a short term blip, with a return to positive growth.

There were a number of questions from the attendees, which were so interesting in I forgot to take notes. One that helped me recover from my stupor was a question on China. Zimmerman was asked what the impact would be if China decided to invest their profits in Euros rather than dollars, causing the dollar to crash. Gary’s answer was if the dollar crashed, China would not have any market for its products. Same for Japan. It is in the best interest of China and Japan, that the dollar remain strong enough, so that we can continue our high level of consumer spending. We have a mutual interest in globalization and international trade.

Another point Gary made was that China’s growth in manufacturing and India’s growth in software development, has not increased per their capita income, as the population growth rate is higher than their economic growth.

According the Fed the US housing bubble is regional, reflected in California/Arizona, Florida, and New England. These bubbles still have some legs, according to the Fed.

Over all, the US economy is strong and growing. One political question not asked: If the economy is growing, with low unemployment, and little inflation, why is the number two reason for President Bush’s low poll numbers attributed to a poor economy? Any ideas?

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Blogger Frederic Christie said...

Indeed, education cuts made by mostly conservative folks (though "liberals" have shamefully taken part) threaten America's dignity and prosperity. Studies show that teachers are paid less than their professional cohort and that when salaries go up shortages disappear.

Katrina's impact isn't likely to dent the economy too much, but that owes quite a bit to the fact that there will be GDP growth from the profit of rebuilding. GDP is blind.

The US won't retain its stranglehold on the global economy for long. We have a ten trillion GDP but slow growth, and other countries have fast growth and are unifying into trade blocs (the EU being the most obvious example). The world has been slipping, militarily and economically, to a tripolar or possibly larger world for quite some time, with the US very much the loser.

The reason why Bush is getting so much bad press is very simple: The strength of the economy is at X. Presidents and political initiatives under capitalism don't determine X, they subtract or add. The economy would be better off had Bush not done many of his initiatives. Further, speaking more generally, Bush's policies are guaranteed to generate anemic growth (as, not looking at the last year or even the last decade but the last forty or more years, is really what the growth we have now is), severe social immobility and inequity, and quite a bit of hardship. Scratch under the unemployment statistics (unemployment, of course, not being ipso facto good: Milt Friedman has said that employment goes up if people abandon hope of higher pay), the GDP growth, etc. and begin looking at a broader variety of indicators, what the GDP growth hinges on, etc. and a very different story shows.

Fri Sep 09, 12:08:00 AM PDT  

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