www.gsabusiness.com -- Bruce
Yandle, Clemson University alumni distinguished professor emeritus of
economics, expects the Federal Reserve to “nudge up the interest rate
just a bit at its December meeting.” He said that between now and 2018,
the nation will see real gross domestic product growth between 2.2% and
3.0% followed by “a slowing economy, an old-fashioned credit crunch,” in
late 2018. Yandle anticipates the interest rate will increase
slightly because of a strong employment report in the Southeastern
region, specifically in what he called Charlanta, the area between
Charlotte and Atlanta. Yandle gave his remarks at the fourth annual
Dixon Hughes Goodman Greenville Executive Briefing Series at the
Marriott on Tuesday. “If the Fed raises the federal funds rate, over which they have some
control, they will, in a sense, be endorsing what the market already has
done,” Yandle said. “But of course intervening events, such as the
Paris tragedy, could affect what the market sees in the way of interest
rates, but I’m sort of betting that this time we will see that move up
for the first time since the great recession.” Yandle expects real GDP growth of 2.2% to 3% in 2016.
“I
still think we will see a slowing of the economy, an old fashioned
credit crunch, not a 2008 recession … long about 2018, maybe 2019 when
the Fed becomes worried about inflation,” Yandle said. :ast year
there were five GDP forecasts for 2015, according to Yandle. The lowest
forecast was 2.6% from the International Monetary Fund, and the second
lowest was from Wells Fargo at 2.9%. The other forecasts were around
3.0%. “Today we will be lucky if we hit 2.4% this year,” Yandle
said, “and that immediately raises the questions ‘Why?’ ‘What happened?’
”Yandle attributes the slowdown to the European Central Bank printing more money and the slowing Chinese economy. “Europe
began to run their printing presses at high speed and started printing
money faster than we print money, which led to a strong U.S. dollar,” he
said. “When our dollar is stronger relative to other countries, we can
buy more of their goods, but they buy less of ours. So our imports go up
and exports go down, and down goes GDP growth.” China is the
largest buyer of all raw materials and minerals, other than oil, Yandle
said. So when an economy as large as China slows down, it slows down
production and purchases and brought a sharp reduction in prices.
