Understanding the complex national economy may begin at an unexpected place - the mirror.
"If we understand the economy, we understand our community," said Andrew Hook, international economist and guest speaker at a Thursday forum at Central Lakes College. "In some ways it's very simple. What we think of as the economy is what happens to us. But that's not right. That's part of it. But it's also what we do. Every single one of us. You don't even have to have a full-time job or anything, but every one of us in some way is part of the economy."
Hook is a new cabin owner in the Crosby area. His experience in banking and finance is extensive. He has worked for the World Bank, International Monetary Fund and the Federal Reserve Bank of New York.
Thursday he presented "An Economic Outlook" to a gathering at the Chalberg Theatre sponsored by the Gordon Rosenmeier Center for State and Local Government.
Andrew Hook talked about the economic outlook Thursday in the Chalberg Theatre at Central Lakes College in Brainerd. Hook, an international economist with extensive experience, recently became a cabin owner in the Crosby area. The event was sponsored by the Gordon Rosenmeier Center for State and Local Government.
Brainerd Dispatch/ Steve Kohls
Hook began his comments by talking about the Brainerd school budget and plans for cutbacks in sports. Removing exercise benefiting a young person's body and growth may not be the best, Hook said, adding that the reaction from people to try to do something is one of the reasons he moved here.
"That is wonderful," he said. "That is what we should all be trying to think about in these difficult times. There may be things we can't do, but there are things we can do."
While there is ongoing debate whether the nation is in an economic slowdown or a recession, Hook said one thing is clear.
"Everyone is saying the growth period for the six previous years is finished," he said. "There was a period for a long time where the U.S. economy was doing well, the U.S. business and consumer was doing well. That time has come to an end."
Hook described the economy as a complex, living entity that changes because of everyone's role in it. The slowdown now is not the same as the one in the 1990s or the difficult 1980s.
In an economic slowdown, businesses looking at current high growth use today as a barometer for the future. When a realization comes that it cannot continue at that pace and demand collapses, businesses are left with large unsold inventories. Layoffs follow, which drive the economy even lower, and the cycle is in full bloom.
Hook said the Federal Reserve was set up to deal with those cycles, to provide confidence to the public and financial institutions that there is no need to panic. The Great Depression was, in part, a failure of public authorities to recognize it and take proper measures, Hook said.
More recently, Hook said the trouble came with low interest rates and housing prices that kept going up. People believed home value increases would continue in the future at that pace, Hook said, adding that the housing market became speculative. He said it was not unlike the dot.com bust.
"The house prices as they were awhile back were just not sustainable," Hook said. "They were based on projections of unbelievable, incredible kinds of growth going on for periods nobody had ever seen."
How bad the slowdown is, even to particular regions, will be somewhat proportional to the amount of speculation, Hook said.
A key element in the economy is productivity, Hook said, but it can be difficult to measure. Hook said that as heavy industry has declined as a key driver in the business cycle, the service sector has expanded. Services don't mean just flipping burgers, Hook said, adding it includes work in technology (via the computer and the Internet) and developing new approaches.
"The U.S. has a real advantage in the applied side of services," Hook said.
Since World War II, the U.S. economy has been dominant worldwide.
"This is changing," Hook said.
On a large-scale view, the country is spending more than it saves, and along with the trade deficit, cannot go on forever, Hook said. Households will need to increase their savings rate and the U.S. will need to export more in the future, he said.
Hook's experience includes banking, finance and economic development in Africa, Asia, South America, Central America, North America, the Caribbean and Europe. He recently worked with the governor of the Central Bank in Afghanistan during the country's implementation of a currency conversion.
RENEE RICHARDSON may be reached at firstname.lastname@example.org or 855-5852.
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