Industry Research

Droll Economist Predicts A Long, Long Road To Recovery

LCT Staff
Posted on October 14, 2009

MOHEGAN SUN RESORT & CASINO, CT — The deep recession that started in December 2007 will likely bottom out by year’s end, but still take several years to recover in terms of job numbers, economist San Dinkin told operators at a general session here last week.

Dr. Dinkin, senior auction consultant at Power Auctions LLC in Austin, Texas and a futurist, has been advising Fortune 50 corporations and governments on six continents on economic issues. He has researched economics at IBM and T.J. Watson Research where he holds 18 patents and has another 24 pending.

“It will take a few years to recover from a recession this deep,” said Dinkin, citing a 6% contraction so far in America’s employment base since it peaked exactly two years ago. “The recovery will have a long tail.” In Boston, for example, employment has slightly ticked up, he said. “We hope that Boston is a leading indicator.”

One tell-tale sign of a turnaround is that deflation stopped being a threat in December 2008 as prices slowly started to go up in the first quarter of 2009, he said. Employment tends to lag about one year behind an uptick in prices.

Dinkin criticized President Obama’s mammoth, $787 billion stimulus spectacle: “It tried to takes as much money as possible and get the economy moving again. Most of it will be spent after the recovery.” That, in turn, could actually drag on the recovery since the heavy debt load is a burden on the American psyche, causing people to spend less and save more, he added.

A decent stimulus package would’ve simply taken the $2 trillion given to bank and corporate bailouts, consumers, and special interests and cut every American household an equal check, Dinkin said. As the stimulus formula stands now, it will not speed up the recovery, he added, pointing out that Germany and Italy rejected any government stimuli and are recovering sooner than the U.S.

“If you stimulate too late, you cause inflation and boost prices, but not the economy,” Dinkin said. Any stimulus needs to come this year, either in the form of checks to consumers or a 5% rebate on taxes.

Although the stimulus likely will cause taxes to rise, some of them can be avoided or deferred through borrowing, he said. “Don’t worry about taxes going up too much because of the stimulus.”

Dinkin struck a moderate, low-key tone throughout his presentation, sticking to the facts and grounding his comments in plenty of droll, dry wit that goes well with dry numbers: “My daughter last week went bowling and she landed the ball in the left alley. And then she landed the next ball in the right alley. STRIKE!”

To make up for less available credit, businesses can turn to cash, trade credits, angel investors, stock, or non-bank lenders such as hedge and pension funds, Dinkin said. The tougher economy calls for operators to offer less flashy vehicles and be creative with service and payment terms, he said. Dinkin advised operators to pursue markets with possible potential in a recession, such as birthdays, proms, and concerts for younger people; medical transportation for patients and the elderly; and shared commuter rides.

Dinkin offered this sobering fact: In 1936, there were 400 trailer builders in the U.S. By the end of the Great Depression, only one survived: Airstream.

Ending on a hopeful note, Dinkin said Americans must take the long view and understand that the U.S. economy has always expanded and has a vast ability to take on debt. “Every 30 years, income in America doubles,” he said. “Our kids will have twice as much money as we do.” Government will take up 20% of GDP long-term; “there’s plenty to play with in the other 80%.”

The future lies in creativity, marketing, invention, and financing, he said. “I am long-term bullish. There is nothing holding us back.”

Source: Martin Romjue, LCT Magazine

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