Economic Forecaster's Prediction On When Things Will Improve

Greensboro, NC -- The worst of the country's economic problems are not over, according to Dr. Lyle Gramley. The expert in economic forecasting and monetary policy spoke at UNC-Greensboro Thursday.

"The only way we're going to get out of it is strong intervention by the federal government and the Federal Reserve. We're going to have to have a big stimulus package. You're talking about $800 billion now over two years. All of that's going to be needed," he said.

He said people should spend money on anything.

"I think we ought to send them a check, or better yet, cut the taxes that are taken from their payroll and hope they will spend it wisely, but hopefully at least some of it will be spent because if all of it were saved, it wouldn't do us the kind of good we need right now," he said.

Regaining confidence is a slow process, he said.

"One of the things that's terribly important I think is to get our financial markets working again. to remove the fear that banks are going to fail. to increase the flow of credit to businesses and consumers. That would help a great deal," he said.

THe recession could end around the middle of the year, he said. The beginnings of a recovery might come in the second half of the year. Still, the troubles will likely continue.

"If you identify normalcy, let's say, with an unemployment rate of 5 to 5.25 percent. And you asked me when are we going to get there, I would say maybe in the last few days of Obama's first term in office. It's going to be that long," he said.

Gramley said a second wave of foreclosures could come in the middle of 2010 as more people are unable to pay their mortgages because of job loss.

He said the government needs to "prop-up" the housing market. That could be done, he said, by expanding tax credits for homeowners.

Gramley is currently a senior economic adviser with Stanford Group Company's Policy Research. The company provides political, economic and industry research for institutional and corporate investors.

According to information in a UNC-G press release, Gramley served as one of seven Governors of the Federal Reserve Board from 1980 to 1985; and in 1977 he became a member of the President's Council of Economic Advisers. He was appointed to the Federal Reserve Board in May 1980.

To see his charts detailing everything from spending to home mortgage debt, click here.

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