From Daily Planet Staff Reports

Two economists fielded questions for the final 20 minutes of the 2009 Annual Asheville Economic Outlook on July 15 in downtown Asheville.

The economists included Dr. James F. Smith, chief economist for Parsec Financial Management; and Tom Tveidt, research director for the Asheville Area Chamber of Commerce. (For details on their presentations, see story that starts on Page 1).
A man led off by asking if the United States. will have a different experience than Japan, which has been dealing with dire economic problems since 1986 and has lost population for three consecutive years.

“We could go that route,” Smith replied. “We’re racked up over $1 trillion (in debt) in nine months.”

However, Smith said the U.S. government “can’t go on forever” drastically increasing its debt.

“Trends tend to continue until they become unsustainable ... Pretty soon we’ll have a smaller government ... The saving grace is we don’t have such a slow population growth” as Japan’s. “The United States and Canada are the only two developing nations that are growing” in population.

Regarding the population growth, Smith quipped, “That’s what we need — more entrepreneurs.”

Byron Belzac wondered why Smith would be concerned about health care reform, which he said is widely supported by the American people, when Smith earlier had contended that everything in an economic recovery revolves around consumer confidence.

“Yes, reform, but sensible reform,” Smith answered. “Medicaid is wildly popular, but now” it is a financial disaster.

“The idea that we could solve” the health care problem “by extending it (the service) to everyone is crazy.

“If people like (Rep.) Charlie Rangel (D-N.Y.) ... if they ram it through — and it doesn’t work, a new crowd will be in power in 2012. Voters will control the outcome.”

Smith then asked rhetorically, “We have a greater and greater share of the population over 65, so should we raise the retirement age to 75?”

A man asked if the infusion of capital into the financial system has helped or hurt.

Smith noted that there is an economic theory of “letting it burn out. A lot of bad things happen, but it comes back stronger.”
As for the government admonition that certain firms are too big to fail, Smith said, “If they’re too big to fail, perhaps they’re too big to exist.”

Another man asked, “With this steepening yield curve, are banks lending money to local entrepreneurs?”

“I’ve heard they are lending,” Tveidt replied.

“They are, but the terms are very tough,” the man interjected, lamenting that a private firm cannot grow and create new jobs with today’s tight bank lending.

Another man asserted, “I’ve been in small business all of my life. I’ve never gotten a business loan. The fact of the matter is you can’t get a small-business loan without putting up your house as collateral. Now, with homes often upside down, now people don’t have the collateral.”

Smith agreed with the second man’s assessment, adding, “Banks don’t make loans unless they make money on them. If there’s no collateral,” then they cannot afford to take the risk.

Contrary to an earlier speaker’s assessment about a lack of lending to businesses, one banker said her bank has registered a record in mortgage and business loan activity. “We’re making loans, she added.

Another banker said he agreed with some earlier statements at the program that credit remains available, but standards have been tightened up, making it harder to qualify. “Now it’s 20 percent down and a good credit rating,” the banker said.

A man asked whether Smith had any fears about hyperinflation.

“You want hyperinflation, look at Zimbabwe,” Smith said flatly.

Then, he added, “Worrying about inflation or deflation is about the biggest waste of time I can think of.

“Let’s hope President (Barack) Obama has enough sense to reappoint (Federal Reserve chairman) Ben Bernanke. He is a scholar on the bipartisan stupidity of the 1929 Depression.

“Right now, we need to be juicing up things” with the economy, Smith added.

“This is a worldwide recession. China and India have even been down. Even Singapore was down 20 percent one month and up 20 percent the next month,” which, Smith said, shows tremendous volatility.

A man said if “we have cap-and-trade and health-care reform, I can’t see how you can see 8.8 percent growth?”

“I don’t think either thing (cap-and-trade and health-care reform) will happen,” Smith replied. “If they do, we’ll go down.”

As for the past, he said, “In real terms, we recovered everything by 1936 that was lost in the Great Depression that began in 1929. We didn’t need World War II to get out of the Depression. We were already out.”