Abner Womack and FPRI
Presenting at the Kentucky Commodity Conference today, among others was Abner Womack, Co-founder of the Food and Agricultural Policy Research Institute. He gave an overview of his recent study of price and market trends for commodities, particularly corn, but relates much data to soybeans and wheat. He also gave an indication of what his studies suggest when our economic recovery brings us back to our economic output prior to the recession. Consumer debt must decline below the line where assets to debt ratio is less than 100 percent. Assuming a normal trend of 5 points of reduction per year, it will require a minimum of ten years before we can safely say the recovery is complete, to merely get homeowner ratios below 100%..
Plus, though it is always prudent to control our federal spending, even reducing it somewhat, historical data suggests that every massive economic recovery from a deep recession was accompanied by spending programs, like the building of the interstate highway system. Also, finance reform is vital in regulating banking and reinstating stiffer equity requirments for housing loans. Reduction of equity, ie lower down payments is one more key factor in creating the euphoria that encouraged lenders to "fudge" on homeowner's financials and led to the housing bubble.
Another key factor, unemployment rates, the 8.2% federal figure does not even cover the true amount of unemployed in the country. He adds another 18 million, even accounting for the chronic unemployed that will never look for work, but includes those who had jobs, who want jobs but are more than two years away from having been terminated. His data suggests we will not see further recovery until this number decreases substantially.
Womack had other comments, but I've limited this entry to these issues. A very good, but sobering presentation.