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Home Opinion

EDITORIAL: Scared money doesn’t make money

Spotlight Staff by Spotlight Staff
January 20, 2016
in Opinion
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Local economic forecaster Hugh Johnson predicted a forthcoming bear market for 2016, in his annual forecast with members of the Capital Region Chamber of Commerce Friday, predicated on the economy’s cyclical behavior.

The biggest elephants in the room involve the Chinese market, the Federal Reserve and oil prices. China’s unabashed attempts to place itself as a world superpower produced a meteoric rise in production over the past several years. Its rate of growth rivals that of the Industrial Revolution in the United States following the Civil War. But, lately, it appears that rapid ascent is starting to level off. Couple that with the Fed raising its prime rate last month for the first time in a decade, and the continuous drop in oil prices, we live in uncertain times. When investors don’t know what to expect, they lose confidence and start to pull back their money.

Johnson did say that, despite these issues, he could see modest growth for the year. That’s promising considering he appears to be among the many prognosticators who see the hands on the clock and realize we’ve been overdue for a recession (that’s a small “r”) for a few years. That’s a nasty word to say since 2008, but the truth is our economy goes through one every five years, on average. And, depending on who you speak to, we haven’t fully recovered from the last one. Short-term unemployment numbers have decreased from nearly 10 percent in 2009, to about 5 percent today. Long-term unemployment, for those out of work for more than 26 weeks, is above 25 percent – still higher than what it was prior to the Great Recession.

With the Fed’s prime rate at 0%, it left little wiggle room for the Central Bank to make adjustments in a poor economy. The Fed raised the rate by a quarter percent. Now, technically, the prime rate is what the Central Bank offers when it lends to participating banks. When rates are low, a perceived free flow of money gives investors confidence. Higher rates, well, people see that as a time to take advantage of savings accounts.

In Colonie, if there are any plausible arguments at the front step of Town Hall is that there seems to be too much growth for the town to handle. Businesses are sprouting up, as are the residential spaces that follow. So much so, North Colonie is looking at the numbers closely and planning ahead. It’s not just in Colonie, either. The same could be said for Bethlehem, too. And, residential property is booming in Albany and investment properties are abound in Schenectady and Troy.

When the “R” word is dropped on the inquisitive ear, it tends to breed panic. Will we see a slow-down in local development? Maybe in one or two places. But, based on what we see happening around our hometowns, we could see future growth feeding upon the success of those projects currently coming to fruition. Nevertheless, you don’t have to take our word for it.

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