Economy - where from here?

Just back from the PMA convention, where on exhibitor told me it was a place that was happily insulated from the doom and gloom in recent headlines. Unfortunately, as we return to our offices, the doom and gloom have not departed. Consider this story that quotes the now-familiar economist Roubini:

U.S. house prices will fall by the most since the Great Depression and continue to decline until at least 2010, said Nouriel Roubini, the professor at New York University's Stern School of Business who predicted the current financial crisis in 2006.

''I expect home prices are going to fall at an annualized rate of 16 percent,'' Roubini said Monday in a Bloomberg Radio interview. ``The cumulative fall in home prices is going to 40 percent until 2010. It's the biggest drop in home prices since the Great Depression.''

The latest S&P/Case-Schiller home-price index of 20 U.S. cities dropped a more-than-forecast 16.3 percent in July from a year earlier, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, indicating that the worst housing recession in at least a generation has yet to bottom out even before this month's market turmoil.

As many as ''21 million out of the 50 million homes that have mortgages are going to go into negative equity,'' Roubini said. ``People will have an incentive to walk away from their homes.''

The 50-year-old former senior advisor to the U.S. Treasury Department forecast in February a ''catastrophic'' financial meltdown that central bankers would fail to prevent and that would lead to the bankruptcy of large banks exposed to mortgages. His comments preceded the collapse of Bearn Stearns & Cos. and Lehman Brothers Holdings Inc.

``We're at the beginning of a U.S. and global recession, Roubini said. ``We're going to have a severe and protracted two- year recession.''

It would be no surprise if the U.S. Federal Reserve lowered interest rates by 50 basis points to 1 percent, Roubini said, without being specific on the timing of the cut. Rates will subsequently be reduced to ''nearly zero percent'' as a recession takes hold, he said.


TK: We can hope Roubini is wrong, which has been a rare event. Even if he is right, however, all is not lost. One of the most memorable moments of the convention, for me, was Bruce Taylor's speech to attendees about his experience when things weren't going well. From his speech:


Finally, let me tell you a personal story to provide encouragement for you. I am sure a touch of fear has crossed your mind recently. Fourteen years ago I did not have a job. I had started a new company, but that was only a piece of paper. I had business cards made at Kinko’s. I would spend the day in a small office at our home…and when no one was looking I would lie on the floor and stare at the ceiling… for hours. I was scared… and it felt like I had nothing. But usually about the time I was feeling sorriest for myself, our youngest son would crawl in and lay on top of me… and Linda would come in with a hug and a word of encouragement. In the next twelve months I came to learn that instead of having nothing… I really had everything. I had a loving and supportive family; I had former suppliers and former customers who wanted to support me; I had friends and former associates who wanted to be on the new team; and I had the benefit of thirteen years of PMA-inspired events, education and relationships.

I tell you this because today, each of you has more going for you than you think. You have more strength and support than you know.