What Recession?

Everybody, "listen up"! If you continue to listen to the national news media you could get depressed. We are not only coming out of the recession as this is written, we may indeed already be out of it. A few weeks ago I wrote that we were probably coming out of recession. Now, I believe we are not only coming out, but are now out of it.

It is a proven, historical fact that when a bad event occurs in the country such as 9-11, the bottom of an economic decline also occurs at the same time. Americans tend to respond with a resiliency that is unique to the fabric of our country. As a result the economy will and is receiving a "bounce" from the terrible tragedy of September 2001.

There are several other reasons that we are out of recession that were given this week by Gregory Miller, Chief Economist, SunTrust Bank and Chairman of the Economic Advisory Committee of the American Bankers Association. He meets regularly with Alan Greenspan, Fed Chairman, to discuss the economy and monetary policy.

Primarily, we are looking at four positive signs:

First, interest rates have come down over the past year. There have been eleven rate reductions by the Federal Reserve. This level of reduction stimulates businesses and individuals to borrow and we are seeing that begin to occur. We may have seen the last reduction for this cycle.

Second, the stock market is definitely improving. The average American that is invested in the market is now sitting on cash waiting to get back in the market if not in the market already. There is a lot of "nibbling" going on and the general feeling is one of "confidence is definitely rebuilding at a more rapid rate than first perceived."

Third, the cost of energy has greatly declined and is stable. A barrel of oil is now in the twenty dollar range versus forty dollars just a few months ago. It costs less to fill your gas tank thus putting more cash in your pocket. Prices could and will increase somewhat but the price of oil is still cheap compared to other countries. (Note: we still must have a strong energy policy to maintain reasonable prices in the future to support this part of our economic engine)

Fourth, our nation's fiscal policy has been what was needed. The stimulus package that was passed last year helped. The rebates were not spent by very many people, however. They found their way into bank CD's instead. Now, the CD's are coming due and the funds seem to be going into the stock market. This is a positive sign for the economy also.

Finally, inventories are now corrected having been very high and over the past four quarters have been adjusted to manageable levels. Now, there is a need to replenish those inventories that will mean more jobs created to produce those products. In turn, those new employees will get paychecks that will be spent and this will also serve to help stimulate the economy.

So, 2002 is positioned to be one of recovery. (I predict in six months economists will determine that we exited the recession in October or November of 2001). It will not be rapid recovery, but rather, slow, methodical recovery that will again bring economic prosperity to our country. By the end of 2002, we will be well into the new economic cycle.

Congratulations, America! You have again proven that we are the greatest country in the world setting the example for others to see and follow.