When John Gnuschke, director of the Sparks Bureau of Business and Economic Research, spoke to a Memphis Rotary Club luncheon on Tuesday, he began by lamenting what so many other economists of various stripes are gnashing their teeth about — the Federal Reserve Bank's delay in scaling back its bond purchases, despite advance indication from Fed chairman Ben Bernanke that such a move was in the cards. The wittier among our bean-counting set have taken to calling that "the taper caper" — from the bottom-line fact that the Fed is thereby declining to taper from its current "easy money" policy, which has interest rates hovering at near zero.
That decision means, said Gnuschke, that the economy is destined to putter along at modest growth levels for the foreseeable future — if, indeed, any further growth is possible. He sees the current "recovery" has having been squeezed "about as far as it can go."
Gnuschke sees the latest Fed action as part and parcel of a series of bad moves — beginning with the decision by former Fed chairman Alan Green-span, more than a decade ago, to cool off what Greenspan saw as an overheated economy by raising interest rates. That brought about a recession in the early 2000s, Gnuschke said. The same cold-water action occurred just before the bursting of the housing bubble at the end of the last decade, and, in fact, brought that disaster about, he averred.
And thereafter, the Fed's near zero interest-rate policy has deterred investment because of diminished incentives and the increased likelihood of risky loans.
So does Gnuschke have an answer? He has several, it turns out. One of them is fairly conventional — corporate tax cuts, as much because other means for stimulating the economy are unavailable, as for any other reason.
Another solution is more creative — if, upon reflection, somewhat obvious. Demonstrating via a graph that half the world's population is contained within a small circumscribed area of East Asian nations, Gnuschke said it was no accident that so much of the world's economy is dependent on activity emanating from that area, especially in a time when Asia is progressing economically by leaps and bounds.
It therefore behooves business and economic decision makers to accelerate relations with Asia. He asked the Rotarians how many of them were in the habit of exchanging pleasantries with Facebook friends in that part of the world. Greeted by virtual silence, he confessed, "Me, neither." But, he suggested, that needs to change, as does our region's complacency about its place in the current economic order.
Nashville, Gnuschke said, is leaving Memphis in its rearview mirror, with a job-growth rate last year six times that of our own. So are other cities our size. Gnuschke mentioned Charlotte as a case in point, attributing much of the North Carolina city's growth to its active courting of companies from Asia.
There's a limit to what most of us can do about the current slow-growth/no-growth scenario, but we all could do worse than to consider Gnuschke's economic advice and go east, young man.