In a time when there are more questions than answers, experts are looking closely at the factors that caused the deepening economic crisis in search …
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In a time when there are more questions than answers, experts
are looking closely at the factors that caused the deepening
economic crisis in search of a solid road to recovery.
Many people know that with weakening job stability and
diminishing retirement funds dominating headlines, forecasts for
the upcoming year are bleak.
While experts have diverging viewpoints on just what will
resurrect the economy, most are optimistic that Americans will
emerge with a better understanding of the financial system and a
renewed sense of responsibility.
Dr. Richard Wobbekind, chief economist at Leeds School of
Business at the University of Colorado at Boulder, has a unique
perspective on Denver’s economic pulse. He has prepared detailed
forecasts for the state and has an extensive educational background
in regional economics and business research among others. Wobbekind
is now using that know-how to teach Denver area residents about the
ebbs and flows of business cycles, impacts of global markets on the
local financial landscape and practical ways for investors to
weather the storm.
In his travels as a leading keynote speaker at seminars
statewide, Wobbekind has seen first-hand the stresses that everyday
Coloradans are enduring. Residents over the age of 50 are becoming
increasingly worried that there is not enough time to recoup the
losses sustained by their retirement savings. Those who diligently
squirreled away money for use in the wonder years feel slighted by
the recent turn of events.
“People are most upset because they have done everything right,
but still lost a lot of money,” he said. “They feel like the system
let them down in some sense, and in many ways it did.”
Wobbekind has long taken a realistic look at the state of the
regional and national economy, and he shares the opinion that many
experts are now dispensing. Rather than furthering the belief that
things will return to normal late this year or even next year,
Wobbekind predicts a full economic recovery in five to six
In the meantime, the rate of job loss will grow, homes will
continue to be foreclosed upon and college and retirement savings
will likely continue their downward trends before leveling off.
It will take a combination of factors to return to normal, but
rest assured: gone are the days of overinflated home values and
aggrandized stock prices, both of which fed into the last two
recessions, he said.
When all is said and done, there will be more stringent lending
regulations, and, likewise, smarter consumers. Corporate profits
will be kept in check, and there will be more oversight in the
stock market and better enforcement of rules that are critical to
keeping it in working order, he said.
Sadly, some people are just now realizing the need to reduce
frivolous spending and forego a lifestyle far beyond their
financial means. Wise spending habits seemed to dissipate
nationwide as the population grew further away from the troubling
memories of the Great Depression, Wobbekind said.
“Because everyone has been prospering for such a long time, we
lulled ourselves into a sense of security,” he said.
A collapse of this magnitude has never been seen because global
markets have never been so closely interlinked to have such a
profound worldwide effect. Essentially, because of advances in
technology, a financial hiccup on the other side of the world could
have an immediate negative impact on U.S. markets.
When the housing and financial markets imploded and spread into
the stock market, consumer confidence took an unprecedented dive.
Not surprisingly, much of today’s turmoil stems from perceptions of
doom and pessimism on the part of consumers, workers and
Widespread fear is partly responsible for contributing to the
“death spiral” in which the country is caught right now, said Bart
Sayyah, director of economic development for the South Metro Denver
Chamber of Commerce.
A global economic slowdown directly affects the Denver area
because certain local sectors rely heavily on support from foreign
countries. When consumers in large European nations and flourishing
countries such as China stop spending, corporations, in turn,
strive to contain costs, resulting in a trickle-down effect to
Denver-based telecommunications companies, agricultural exports,
software developers and distributors, and the tourism industry. It
also leads to reductions in capital expenditures and foreign
investments that help keep the markets afloat.
“Even throughout the first three quarters [of 2008], businesses
were continuing to invest,” Wobbekind said. “Now that they have
stopped investing, the economy fell off the table.”
The crisis has resulted in a lack of available credit, making if
harder for venture capitalists to help entrepreneurs start a small
business. It is also more difficult for prospective homebuyers with
good credit to secure a loan.
In the coming years, there will be a noticeable evolution in
social programs, perhaps on a larger scale than the period
following the Great Depression of the 1930s. Out of necessity,
wages will rise, productivity will increase and the population will
learn more about the finer points of the credit system and how it
functions, he said.
If approved soon enough, the economic stimulus package being
proposed by the incoming Obama administration could provide a
much-needed boost to Denver’s job sector and be critical in
restoring confidence and putting the nation on a “path to
prosperity,” Wobbekind said.
The Federal Reserve, the central bank system of the United
States, has provided strategic rate cuts under strange
circumstances, but those moves alone have not inspired confidence,
While no businesses in the Denver Technological Center, Meridian
International Business Park or Inverness Business Park are hiring
on a large scale, the South Metro area is well-positioned to come
out of the economic crisis stronger than ever. Savvy investors are
looking to snatch up real estate at bargain prices, including one
San Francisco-based renewable energy company that is considering
moving its headquarters to either Arapahoe County or Douglas
County, Sayyah said.
The South Metro area is fortunate enough to have an educated
labor pool, something that entices larger companies that pay higher
wages to relocate here. And because of Arapahoe and Douglas
counties’ diversified economy, the area is more resistant to the
violent downturns that typically hit the coasts much harder.
Denver International Airport and the FastTracks initiative,
which is expected to improve regional transportation, are also
considered critical assets. Those factors, combined with a
favorable regulatory environment and Colorado’s distinction as a
desirable place to live, will likely lead to a quicker recovery,
When the smoke clears from the continuing collapse, the economy
could actually come out stronger because of increased awareness and
understanding. Wobbekind estimates that 30 percent of the crisis is
real, while a whopping 70 percent is imagined.
“The health of the financial community has to be based on the
real economy being healthy,” he said.
Although there are few silver linings to cling to at the moment,
it will be an unforeseen industry that will help awaken the idle
economy. More than a few experts have predicted that clean
technology and renewable energy will lead the way, but there is no
clear way to determine what will launch the comeback.
Eventually, Sayyah said, an increase in spending and consumer
confidence could spread like wildfire in much the same way that
rampant fears have a prevailing influence over the existing
For now, consumers must find a healthy balance between sensible
spending and saving enough for potentially more difficult times,
and wait until the storm passes.
“We lulledourselves into a sense of security.”
Dr. Richard Wobbekind, chief economistLeeds School of
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