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Attendees came to hear Charles Evans' take on the economy in order to make better decisions for their companies and personal investments.

Charles Evans assures that recession is over

by Dani Fankhauser and Katharine Lau
March 04, 2010

Federal Reserve Bank of Chicago President Charles Evans offered answers to the three questions on everyone’s minds: “yes, no, and we’ve learned a lot.”     

These three economic questions were: economic recovery, inflation and the financial crisis. Evans discussed these topics Thursday through a speech, followed by a Q-and-A session, at a Distinguished Speakers Series Luncheon hosted by the Chartered Financial Analyst Society of Chicago.   

“Many households and businesses do not yet feel like they are in much of a recovery,” Evans said. “Unemployment remains very high, and many businesses are still producing and selling much less than they did two years ago.”   

To suggest that the economy is in the early stages of recovery, Evans’ talk, at the Mid-America Club, covered both the positives, improving real gross domestic product and increasing demand from abroad – and the negatives, a slow rebounding of the housing market and “only a gradual recovery in consumer spending.” 

He also reminded the 100 or so attendees: “Employment is often the last piece of the puzzle to fall into place during a recovery. This will certainly be true this time.”     

Evans said he expects “modest growth” for a “recovery following a deep recession” and “anticipate[s] that restrictive bank credit, along with business and household caution, will continue to restrain the recovery’s strength.”   

“I think inflation will remain relatively stable,” Evans said. “But the fact that I get these completely different questions highlights the degree of uncertainty currently underlying the inflation outlook.”   

Uncertain, or at least divided, were the members of the audience.

“The impact that monetary policy has had on the economy, I think, understanding their next step is an important part of any investor's decision-making process,” said Brian Andrew, chief operating officer of 1492 Capital Management LLC.    

Raheela Anwar, a private investor, was particularly interested to know how the government plans to deal with risk management and how those decisions affect the consumer.   

My husband and I have several significant decisions that we're making in terms of long-term retirement, asset growth, composition of our portfolio,” said Anwar, on why she chose to attend Evans’ talk.   

Gautam Dhingra, CEO of High Pointe Capital Management LLC, felt that though Evans acknowledged that the recovery would be long and difficult, he missed a key piece of the puzzle: withdrawing the stimulus funds.      

“If we don't want to be another Greece, there has to be a limit to the stimulus. He did not talk about what that limit on the stimulus was,” Dhingra said. “My sense is we already have reached the end of our limit, practically speaking, and therefore, there is no more room. And he did not address what happens in that scenario.” 

Sean Casey, president of Vestian Group Inc. and a member of the board of directors of CFA Society of Chicago, debated the influence of fiscal versus monetary policies. To actually make changes, a “vast majority” of those changes must be done by the government, which just is not physically possible, according to Casey. The question then remains, what role can the Federal Reserve play? 

“When someone asks, what can the Federal Reserve do to help this debt growth problem, sadly enough the only thing they can do in my opinion is – and it’s not probably legitimate or advisable – is keep rates really low for a long time and just let inflation happen,” Casey said. “Because the government’s spending so much money that if you owe a lot, it becomes feeling like a little and maybe we can just inflate our way out of it.”