Economist: ‘Great Moderation’ will keep country from recession

NORWICH – If there is a recession due to the subprime fallout, it won’t last long, one economist predicts.

“If we do have a recession, it will be moderate – not very long, not very deep,” said Dr. Edmond Seifried, an economics professor at Lafayette College and finance analyst for a consulting firm in Pennsylvania.

Seifried, who has been published numerous times and lectures across the country, was the special guest speaker Tuesday morning before a crowd of 70 to 80 who attended Commerce Chenango’s Economic Forecast Breakfast held at the Canasawacta Country Club in North Norwich.

The professor said he expects there might even be some positive growth by year’s end, if only 1 or 2 percent, and inflation could even go down.

That’s after the subprime mortgage crisis gets worse in the coming months, he contends.

How? Because of something called the “Great Moderation” theory. Seifried says it’s the emerging idea that the U.S. economy, since roughly 1984, has been able, and will continue to be able, to protect itself and shake off setbacks that in years past would have sent the country into a tailspin.

In short, the economy – specifically inflation and the stock market – is significantly less volatile; by 60 percent, some estimate. The proof, Great Moderation supporters say: There hasn’t been a recession in 18 years, when there used to be one every four or five.

For local business owners and financial institutions, the economist believes banking on this theory could help change their outlook, and returns, from bleak to bright.

“I think it can change your life,” said Seifried, “if you truly buy into it, understand it and accept it.”

According to a business survey conducted by Commerce Chenango, the top issues on the minds of local business community in 2008 are health care, energy costs and high taxes.

Commerce Chenango President and CEO Maureen Carpenter says the problem starts at the state level, where taxes are 56 percent higher than the national average. Health care has also gone up 12 to 15 percent. Her organization plans to focus on lobbying the state for incremental health care plan restructuring and continued lower-energy cost programs for area businesses. Locally, Commerce Chenango will continue to “keep the lines of communication open” between local leaders on government consolidation issues, Carpenter said.