Economists disagree on crises' causes

We're not all experiencing the recession in the same way, so even economists don't agree on what economic recovery is going to look like when it happens, members of the CFA Society of Salt Lake heard at their fifth annual economic-forecast breakfast Thursday.

George Feiger, chief executive officer of Cantango Capital Advisors and executive vice president of Cantango's parent company, Zions Bancorp., and James E. Glassman, managing director and senior economist at JPMorgan Chase, have very different views of what went wrong and what comes next. But they agree that the economy will recover. And it will probably take awhile.

Forget the subprime mortgage crisis, said Feiger, who believes the underpinnings of the recession can be found in America's "absolutely staggering amount of debt," both household and corporate, which was then packaged and leveraged and repackaged and re-leveraged until it all fell apart.

"The economy is in a severe and likely long recession," he said, adding it will be at least a year before we get economic growth. In the meantime, the stranglehold on credit will have to loosen for things to get moving again.

But within a year or two, he predicted, the problem will be over for the housing market and "maybe for stocks." And right now, there's a great deal of opportunity for bargains, he said. But he also warned of a "rollover crisis" to come in terms of corporate debt.

Glassman disagreed about the underpinnings of the crunch, calling leverage a "big red herring." Consumer credit isn't the problem, he told the group. And inflation is not an issue. Fear and its impact, however, undeniably paralyze the economy. Glassman said the fundamental problems with the economy have now been addressed, if not completely resolved.

"The main problem now is fear," he said.

Despite predictions of a slow recovery, Glassman sees silver linings. "Inflated (housing) valuations are history," and a generation of young people who need houses will be able to get them at "decent prices," he said. Credit will get flowing again, which is essential to recovery. He predicts the federal economic-stimulus package will have a positive impact.

"The economy wants to grow," Glassman said, noting that any time the U.S. economy has faltered, it has always recovered.

E-mail: lois@desnews.com