Next Stop, Depression?
Back on March 29, ABC News’ David R. Francis talked about the economic forecast of Robert Parks, a finance professor at Pace University and former chief economist at three Wall Street firms. So, what’s so special about Parks that ABC News would be covering him? According to Francis, Parks is predicting that there is more than a 60% chance the United States will enter into an economic depression.
Even though the Federal Reserve has been cutting interest rates to stimulate the economy, Francis wrote:
Mr. Parks, however, doubts the cuts will do much to boost the economy. Rather, he sees a further steep fall in housing prices, continued major deficits in the federal budget and in the international trade balance, a tumbling dollar, and a weak stock market leading to a genuine depression with 30 to 35 percent unemployment, greater poverty, more loss of homes, plunging bond and stock prices, even some starvation.
Mother and child during Great Depression
Source: FDR Presidential Library & Museum
He also noted that Parks says he has never predicted a depression before.
The economist thinks that it’s a mistake to rely on money supply growth to help alleviate present economic conditions. Francis wrote:
As Parks sees it, Washington and Wall Street are mostly counting on Fed additions to the money supply to revive the free market and right the economy.
“Automatic recovery is in no way a reliable concept,” he warns, especially if deflation (falling prices) has begun. He recalls warning of the economic damage that the bursting real estate and stock market bubbles would wreak in Japan: That nation suffered stagnation from 1990 to 2001.
Source:
“Are We Heading Into a Depression?”
David R. Francis
ABC News, March 29, 2008
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