Our View: Back to recession?
Posted: October 3, 2012
Much as he “hates” to employ the term, real-estate mogul Sam Zell let the “M” word slip from his lips during a recent interview with CNBC senior writer Jeff Cox.
Yes, “M” as in “malaise,” a word we haven’t seen used relative to the economy (and the national spirit) since Jimmy Carter dropped it in the ’70s. Along with it, Mr. Zell mixed in “recession” for good measure.
What has the rotund land tycoon, the CEO of Equity Group Investments, so concerned? A lack of movement in this economy, stemming from a lack of confidence on the part of American companies, due to a lack of leadership in Washington. In other words, there are too many “lacks” these days for Mr. Zell’s liking.
Despite the Federal Reserve’s latest round of wishful thinking — known in Fed-speak as “quantitative easing” or, in the vernacular, as “pump-priming” — even those companies eager to invest in their businesses are refusing to budge. Their cumulative $2 trillion in cash assets remain in figurative mothballs. Recession may result.
How so? Mr. Zell explains: “Nobody wants to make commitments beyond tomorrow. One of these (recession) triggers is when enterprise projects start getting delayed. We’re heading for a recession, and that's exactly what you’re looking at . . . You’re looking at capital expenditures across the board being deferred for a reason: There’s no confidence.”
Such paucity may also serve to explain (at least partially) reluctance on the part of individuals with money to invest to actually do so. Washington may be advising folks to take a risk or two, but these people are turning a deaf ear, preferring instead to pour money into savings, now at its highest level since the Fed started issuing regular reports on money flow in 1945. Savings accounts swelled to $6.9 trillion this past spring, a 5 percent increase.
Why such savings? A better question may be: Why not? Americans, frankly, are leery of the stock market, despite its climb beyond the 13,000 barrier. And, uncertain about everything, from prospects in the job market to the assumption of new debt, they’re hunkering down. Can you blame them?
What they — i.e., folks running the spectrum from Mr. Zell to Joe Bag-a-Donuts down the street — seem to be clamoring for is leadership that instills confidence, leadership seemingly in short supply.
Mr. Zell gives voice to these concerns, and this desire, rather well. “We need leadership, not criticism,” he says. “We need encouragement, not discouragement. Until that scenario changes, I think the United States is, quote-unquote and I hate to use this word, in a malaise.”
Ooh, that word. Its very use prompts a question: Are Americans so “discouraged” that they’ll seize the opportunity to change that “scenario” themselves, on Election Day?