IMBC speaker: This is not 1929


The recession will be over when we decide it’s over, said economist Tony Villamil in a discussion of U.S. and global economic conditions Tuesday at the International Marina and Boatyard Conference in Fort Lauderdale.

“We’re not in a typical recession,” said Villamil, dean of the business school at St. Thomas University in Miami. ”We have a crisis of confidence in the United States economic system and in the world economic system.”

Villamil, former undersecretary of commerce for economic affairs in the George H.W. Bush administration and economic advisor to two Florida governors, said this is not 1929. “We are in quite a different environment,” he said. He told some 600 attendees — the best turnout yet for the annual IMBC — that if owners manage their businesses well, they can survive the downturn.

Villamil said interest rates are low, the federal government still is pumping liquidity into the banking system, a massive fiscal stimulus is in the works, central banks and governments around the world are cooperating to jump-start the global economy, and energy prices have dropped back into a tolerable range. Demographics also are favorable for the boating business, with baby boomers waiting in the wings to spend some time — and money — on leisure activities.

Villamil said the big questions are: When will banks regain the confidence to lend, and when will consumers regain the confidence to buy?

“The first half of this year will be very tough,” he said. But if government stimuli have any serious traction, we can expect the economy to hit bottom by the latter part of this year and begin to pick up in late ’09 or ’10. He believes this recession will prove to be U-shaped instead of L- or V-shaped. It went down sharply; it should bottom out and stay bottomed out for a while, and then it should climb back up.

Villamil’s projections for 2009: a 1 percent decline in real gross domestic product, 1 to 2 percent inflation, 2.1 percent personal income growth, a 0.85 percent federal funds rate, and 7.8 percent unemployment. He suspects unemployment will reach “8 or 9 percent before this is all said and done.”

Consumers will have to repair their balance sheets — pay off credit card debt and recapture some of their lost housing and investment wealth — before we see a growth trend of 3 to 4 percent in spending again, he said.

His recommendation is for owners to manage their businesses in countercyclical fashion. Try not to lose key employees, lock into long-term borrowing rates now, keep inventory lean and mean, and continue to advertise, but gear it to current economic conditions.

“Those that do will do OK,” he said. “This too shall pass.”

— Jim Flannery


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