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» VISIT US ONLINE @ DSNEWS.COM [and debt] until they have confidence that tomorrow will be brighter." According to venture capitalist John Williams, though, the government is the culprit of the sluggish economic recovery. "Most of the recoveries in the United States have led with the housing market," he said. "When people buy homes, they fill them with things. That process drives further growth. But housing prices in these past recoveries fell below the historic average growth curve in housing. Recent U.S. policy to keep housing prices high, or stable, is halting the natural recovery process. It may be good for current homeowners, but it halts the buying of 'things.'" Donald Sherer, CEO of Nomos Realty Advisors of Las Vegas, also blamed govern- ment. "Our leaders in Washington—both parties—have lost track of basic economic theory," he said. "Washington is totally focused on Wall Street and how they are doing. Historically, performance of the stock market has been a good barometer of the underlying U.S. economy. The Bernanke- Paulson [former Treasury Secretary Henry Paulson]-Geithner [current Treasury Secretary Timothy Geithner] clique have the idea that by artificially moving the stock market higher the underlying economy will follow. "After spending a couple of trillion dollars done noticeably better than states where hous- ing got hammered." He points to three forces behind the slow uct of the housing bust. But it took on a life of its own when fallout from housing almost brought down the global financial system in 2008. The repercussions of those dramatic events still affect markets today." The second factor, uncertainty, has three remain skittish even in the face of better economic news," he said. "Many of my busi- ness contacts say they remain cautious about pattern of growth: tight credit, uncertainty, and government contraction. "Tight credit," he said, "was clearly a prod- sub-factors in and of itself, according to the San Francisco Fed president. "Businesses, investors, and households to the Fed bank's Williams, could be with us for a while. "I don't see government spend- ing turning around soon," he said. "Indeed, spending at the federal level is set to contract sharply at the end of this year as several tem- porary programs end. Some of those programs may be extended. But, overall, we can expect federal spending trends to weigh on near-term economic growth." Aimee Elizabeth, author of Poverty Sucks! These untimely government cuts, according How to Become a Self Made Millionaire, does not believe the slow nature of the economic recovery is due to the moribund nature of resi- dential investment. "Families buying homes is a barometer of the economy," she said. "When the economy is good, people have money, and having their policies fail, they need to get out of the way and let the housing market heal itself," Sherer continued. "My biggest concern is that while experimenting with their crazy ideas, Bernanke-Paulson-Geithner have set up this Frankenstein banking system that is bleeding the economy. Growth in the economy can only come from an increase in economic activity. All this other stuff is simply a shell game. What scares me the most are the derivatives; when they come tumbling down, it will be ugly, real ugly. The Federal Reserve has struggled to juggle stock markets with a capitalization of $35 trillion. What can they do with a $700 trillion derivatives market?" According to the San Francisco Fed's John Williams, "The economy faces obstacles that are national in scope. The slow pace of expan- sion has affected all regions of the country. During the recovery, states where house price declines have been relatively mild have not "The close relationship between the fall in home prices and state economic activity has largely disappeared during the recovery. There's almost no systematic relationship between employment growth and home price declines." expanding because they're unsure about future conditions. Ordinary Americans worry about job prospects and future income. Everybody is unsettled by the highly charged political environment." That "highly charged political environment" leads directly to the third element, reducing the size of government. "Typically, govern- ment spending rises when the economy turns down. That's because the cost of safety net programs, such as unemployment insurance, go up. And sometimes governments deliberately boost spending to stimulate the economy," he noted. "But the federal government's long-term budget problems loom large. And state and local government finances are reeling from the economic downturn. As a result, government stimulus has been unusually limited." feel safe and secure, and spend their money on homes. When the economy is bad, people don't have money, they [are] worried and stressed, and hold on tight to their pennies. The slow housing market is a reflection of the economy, not the cause of it." Housing plays a special role in both the economy and business cycles, so it is hard to imagine a broad recovery absent an improve- ment in housing. The Fed governor may be right in suggesting the basis for a recovery is not just housing. Williams' assertion, though, doesn't exclude housing; it just means our economy is so complex and so interwoven, its recovery will require more than just a recovery in the housing sector. 91

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