European and American economists face off in Paris

PARIS – Consumers may be tiring of hearing news about the state of the economy, but attendees at the World Council of Credit Union’s (WOCCU) fifth International Credit Union Leadership Conference had the opportunity to hear a lively exchange of opinions on the U.S. and international economy as an American and European economist swapped predictions at the plenary session held the third day of the four-day conference. WOCCU CEO Arthur Arnold pointed out that usually the Europeans are more pessimistic than the more optimistic Americans, but Rabobank Chief Economist Wim Boonstra proved him wrong when he predicted that the U.S. economy would make a recovery in the fourth quarter of this year. CUNA’s Chief Economist Bill Hampel thought recovery would come but later, probably in mid-2002. Rabobank is the Netherlands’ biggest co-operative bank. Co-operative banks in Europe are first cousins to American credit unions and share the same founding father. Boonstra felt that despite some problems, the U.S. economy was still strong. He cited factors like consumer confidence and the good public fiscal policy as a reason. Alan Greenspan’s fast response in lowering interest rates added to his predictions. He said the weakest link in the U.S. economy was the balance of payments. Hampel agreed with Boonstra that this is a problem with the U.S. economy, but Hampel also thought that consumer spending will be down, not so much for lack of confidence but as a result of the spending splurge Americans have been on for the best part of the last decade. “We have almost all the washing machines we can use,” Hampel said. He said that the U.S. has had “good luck” for the combination of low inflation and low unemployment over the past few years, something Hampel called “The Goldilocks factor” where everything is just right. Unemployment has been much more of a factor for European economies that Boonstra cited as being weaker than the U.S. economy but not in as great a danger as Japan’s economy. Japan he said does not have the advantages of either Europe or the U.S. at the moment, with its bad public fiscal problems, an unclear monetary policy and low consumer confidence. It is the weak link in the major economies of the world today. Boonstra listed the pros and cons of the new EURO. Even though the currency is not available, national currencies of the 12 participating countries represent the EURO today and have since the beginning of the year. He said that despite bad press and the claim that the EURO is like a failed IPO, those statements are not true. Because of the EURO there is already improved economic policies with low and stable interest rates in the participating countries. The increased transparencies have helped business and government alike. Companies have saved money in exchange rates and reduced risks because they no longer have to take exchange rate into consideration. Arnold predicted where loans were on the rise and savings stable in 2000, the reverse would be true for 2002-2004. – [email protected]