Europe more important than GDP

January 21, 2012
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The executive managing director of market analytics for Colliers International sees modest or no growth for the nation’s economy this year if Congress and the president don’t take action.

“If we could get politicians to do what they say they’re going to do, we’d be in good shape,” said K.C. Conway during the 10th annual West Michigan Economic and Commercial Real Estate Forecast at DeVos Place last week. Conway called for less than 2 percent growth in 2011. “My forecast for this year is modest or no growth while government can’t act.”

Conway gave the crowd something else to consider. “Forget the U.S. Gross Domestic Product. What happens in Europe is going to affect us this year. Europe has to liquidate over a trillion dollars of real estate this year,” he said. “Really watch the earnings numbers as they play out. We’re approximately where we were a year ago.”

Although Conway said the area’s community banks seem to be in good fiscal shape, he said there are plenty of other lending institutions that aren’t. He said 524 of the nation’s banks failed between 2008 and last year, with most closing their doors in 2009 when 250 went dark during the height of the fiscal crisis. He indicated there could be a repeat of that in 2012 for three reasons:

One, a well-respected Sheila Bair left the director’s post last July at the Federal Deposit Insurance Corp., the agency that handled the closings, and her replacement is seen as being somewhat reserved. Two, the FDIC had a funding problem most of last year and didn’t want to borrow. Three, the U.S. Treasury is looking to recover all the unpaid TARP dollars that are owed by 380 banks before this year’s general election. “Treasury has hired a collection agency to collect the remaining TARP dollars, and 380 more banks may fail,” he said.

But topping his comments may have been what Conway said about the nation’s debt, which most believe is somewhere around $15 trillion. He said that figure only represents the “incurred nation’s debt” as reported last summer. But there’s much more.

Conway cited the General Accounting Office’s report that the country’s committed and unfunded debt is $64 trillion. He said the 50 states have a debt total of $4.1 trillion from incurred debt and unfunded pensions, while U.S. municipalities have bond debt of $3 trillion. Total consumer debt from auto loans and credit cards is $2.4 trillion and their mortgage debt is $10.3 trillion.

All those numbers mean the total U.S. debt load comes to $99.1 trillion, not $15 trillion, and that figure translates into a per-capita debt of $322,843. “As a nation, we owe $99 trillion,” said Conway. “I’m really concerned that we’re going to see states reach a crisis point.”

The West Michigan Economic and Commercial Real Estate Forecast is an annual event organized by the Grand Valley State University Seidman College of Business and Colliers International of West Michigan.

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