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About this blog: I am a native of Alameda County, grew up in Pleasanton and currently live in the house I grew up in that is more than 100 years old. I spent 39 years in the daily newspaper business and wrote a column for more than 25 years in add...  (More)

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An optimistic view for East Bay economic recovery

Uploaded: May 26, 2020


There’s quite a debate about what type of recovery can be expected when the country re-opens. Opinions are all over the map.
Last week, Christopher Thornberg of Beacon Economics presented his annual economic outlook via a Zoom call to the East Bay Economic Alliance for Business. He’s been doing these for about 20 years so he’s familiar with the local economy. He drew a stark comparison between the Great Recession of 2008-09 that was driven by poor practices in the housing and finance markets (remember mortgages based on stated income as well as bundles of sub-prime mortgages sold in the investment market) and this government-imposed shutdown driven by responses to the COVID-19 virus.
The recovery from the Great Recession was so slow because of the underlying problems. This time around, he said that if he presented in February, it would be more of the same story he’d been telling for years—sustained economic growth. A February report little chance of recession for two years but noted that the one threat was the coronavirus.
With most states locking down, the economy has plummeted at never before seen rates with unemployment already topping the Great Recession levels. Thornberg believes, however, given that the underlying fundamentals are strong that there will be a robust V-shaped recovery, not the L-shaped, U-shaped or W-shaped models that other economists are predicting.
President Trump and his economic team would have loved the presentation—it would have been music to their ears.
He also said, “Hysteria is the new norm when talking about the coronavirus.” That’s particularly true of the media with its hyping during the 24-hour news cycle.
The challenge for all economists is there’s no past road map on which to base predictions of the recovery. He posed five key questions: How long will shutdowns last; How deep are the closures; how healthy was the economy before the shutdown; what the government does to intervene; will there be a major shift in post-pandemic spending patterns.
He cited downward trend in new virus cases plus the partial or more reopening of some states. He thinks the third quarter will be basically open for business with the exception of large events (sports, concerts, fundraising events) and air travel (air travel, restaurants and hotels make up 5 percent of GDP). He views most of the job loss as temporary as opposed to the Great Recession and thinks it will be a one-quarter plunge in the GDP with the huge spike in unemployment.
He shared that Chinese consumers already are showing increased activity after the lockdown there. As the U.S. reopens, albeit with different ground rules, he believes there will be substantial pent-up demand. There is no real estate bubble or financial crisis to be overcome this time.
Thornberg is concerned that the government may react too much, although states like California have their hands out to the feds. Gov. Newsom’s May revised budget anticipated a $54 billion hole and proposed at 10 percent cut for K-14 education among other reduction. The Legislative Analyst put the shortfall at between $18 billion and $31 billion based on the pace and shape of the recovery. In a CalMatters article, Thornberg was quoted saying, “It’s just preposterously negative…How can you say that out loud without giggling?”
As he wrapped up his presentation, he cited his continuing concern with the housing shortage in California—the long-term problem that needs to be addressed. It contributes significantly to the high cost of doing business in California—of course, the Democrat-dominated Legislature majors in that with its anti-business bills such as trying to end the Gig economy with AB5 last year.
Incidentally, Chris is eager to return to his office and its face-to-face (mask-to-mask?) interaction and believes, again contrary to the prevailing thought—that there is a future for offices in these work-from-home days.

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Comments

 +  Like this comment
Posted by Rich Buckley, a resident of Livermore,
on May 26, 2020 at 12:13 pm

Yes, we can rebuild and we will, smarter and wiser. Let's talk Monetary Reform as we rebuild. Most business students are not taught what really caused the Great Depression... a planned withdrawal of cash out of the banking system.

Even the icon of business philosophy, Professor Milton Friedman opposed the Federal Reserve and urged we get back to US Treasury Dollars and away from Federal Reserve Notes.


There will be an opportunity for monetary reform by going back to “Sovereign Debt“ i.e., the currency our country was founded on. Start at 4:48 past the introductions. Web Link

Mr. Still explains a simple methodology for extracting ourselves over several years out of 57% or more of the great debt burden we carry by paying off short tern T-Bills as they come due with US Treasury Dollars instead of Federal Reserve Note - Dollars.

The key to understanding the Fed is to realize lending institutions that control the Federal Reserve, the Fed itself, declares the Fed is not accountable to anyone. And through the Fed, they have unlimited money. Money used to consolidate directly and indirectly controls over everything including science, space, energy, media, wars, militaries and of course Congress. They arrange to finance both sides of conflicts because conflicts are secured by the sovereign debts of the countries, and there is usually a winner and a loser in conflicts. The winner's pay off debt and take on more. The losers lose their assets to the lenders. Not being accountable the Federal Reserve makes loans all around the globe, where ever they deem it will pay off not to the US but to the Federal Reserve and their interest holders.

Reputable studies Web Link demonstrate that less than 50 organizations control world social dynamics of prosperity, liberty, freedom to debt slavery and tyranny. Even our own Great Depression was a staged event by banks that planned the withdrawal of cash from the US economy to harvest assets at foreclose depressed prices intentionally created by the lenders years in advance.


 +  Like this comment
Posted by Judy Lloyd, a resident of Danville,
on May 27, 2020 at 9:28 am

Hi Tim, I listened to the presentation as well at East Bay EDA and found it quite refreshing! It's nice to hear some good economic news rather than the gloom and doom we hear every day. Chris is a reputable economist, which is what made his news and presentation even sweeter.


 +  Like this comment
Posted by Jason, a resident of Amador Estates,
on Jun 5, 2020 at 8:30 am

Web Link


 +  Like this comment
Posted by Cory Smith, a resident of Danville,
on Jun 8, 2020 at 2:09 am

Cory Smith is a registered user.

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 +  Like this comment
Posted by Thomas Maxwell, a resident of Pleasanton Village,
on Aug 2, 2020 at 2:59 pm

Thomas Maxwell is a registered user.

One thing's for sure, this coronavirus has changed and will continue to change how we go on with our lives. Some may adjust to it fairly quickly, and some already might already be at their wit's end just trying to make things work at the bare minimum. I agree with your last statement, there definitely is a future to working from home. I've been reading news that working from home is not as pleasant as it sounds - decreased productivity, longer project completion times, and more difficulty in internal communications. We at Web Link will be resuming work from the office when it is safe to do so.


 +  Like this comment
Posted by Kevin, a resident of Castlewood,
on Aug 2, 2020 at 6:53 pm

Kevin is a registered user.

I certainly hope he is right. COVID is getting worse by the day not just in CA but the rest of the country. The V recovery is no longer. Let's see if it will be a W recovery or something worse. Let's do our part - wear masks, avoid crowds, and wash hands. It took a friend 8 days to get back her COVID test results. That should not be. Fortunately she tested negative. She stayed home in quarantine for 8 days. She could have been out Being productive and contributing to the economy.


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