SYCAMORE – America’s future economic growth and energy independence lies in its vast, untapped reserves of natural gas, according to one economics and banking expert.
Edmond Seifried, a professor emeritus of economics and business at Lafayette College, gave a presentation Wednesday to a crowd of 50 people at the DeKalb County Farm Bureau on the economic outlook for the country. Despite some challenges, Seifried said the economy will get better.
“You’re going to see a change in your wallets, pocketbooks within five years,” Seifried said at the outset of his presentation. “It’s almost unbelievable.”
Seifried said the country’s economy is too dependent on foreign oil; a 10 percent increase in the price of a barrel of oil causes America’s gross domestic product to drop half a percentage point. Seifried said importing energy hampers the country’s economic growth.
“If we didn’t import any energy, we would not have grown at 2.4 percent, we would have grown at 5 percent,” Seifried said. “If you talk about jobs, every 1 percent increase in GDP is ... 1 million jobs. So 2.6 percent higher growth rate would be 2.6 million new jobs.”
Seifried said the largest natural gas field in the world lies beneath Ohio, Pennsylvania and southwestern New York.
Pittsburgh will become “the Houston of the East” while Ohio will become the “Saudi Arabia of America,” Seifried said.
During his speech, Seifried made a number of references to the November elections, but he did not direct the audience to vote for a particular candidate or party. Seifried noted that many liberals and conservatives have signed on to the potential that domestic natural gas offers.
Seifried also offered insight into some of the recent actions of the Federal Reserve.
He said for the first time, the Fed has revealed its goals. The Fed, according to Seifried, is aiming to cap inflation at 2 percent. But it also pays attention to unemployment, and the Fed is looking to reduce the nation’s unemployment rate from 8.1 percent to somewhere between 5.2 and 6 percent.
This won’t be as easy to accomplish as it has been in other recoveries, Seifried said. After past recessions, the country has seen job growth increase by 5 percent or 6 percent a year. But those numbers have been dropping since 1984. Seifried credited the decreases to new technologies that have replaced human workers, and the outsourcing of jobs overseas.
“The Fed is going to have to face the fact that job growth after a recession isn’t what it used to be,” Seifried said.
The unemployment rate has become the primary concern of the Fed. Seifried said, and Fed Chairman Ben Bernanke is concerned about its long-term effects.
Seifried described the recent meeting of the Federal Open Market Committee – the group inside the Fed that sets interest rates – as historic.
The Fed also will start buying mortgage-backed securities to the tune of $40 billion a month for an indefinite period of time. Seifried described this quantitative easing dropping cash on the American economy.
“Some of this money is going to find a way into your markets,” Seifried said, telling the farmers in the crowd to expect to see commodity prices rise as a result.
Because the Fed is committed to keeping interest rates extremely low for the next couple of years, Seifried encouraged the crowd of business owners to undertake any expansions and renovations now, if possible.
“You’ll never get these kinds of interest rates [again],” Seifried said.
Everyday people can take advantage of the low interest rates, Seifried said in an interview after the presentation. They can re-finance their mortgage, if they’re willing to put in the work.
“If you’re watching that market, you could be saving yourself hundreds of dollars a month,” Seifried said. “If your mortgage is in the 5 or 6 percent range ... there could be some real savings, some gigantic savings. But you have to put in the work.”
Seifried also addressed the upcoming “fiscal cliff” – a mixture of tax increases and budget cuts that will automatically take effect in January unless Congress takes other steps to reduce the nation’s debt. Seifried said now is not the time to fix the deficit – it is better to “kick the can down the road” lest another recession starts.
In addition to low interest rates and using the country’s domestic natural gas supplies, other things that could improve the economy are a pent-up consumer demand for goods, a recovering housing market, a dollar that is comparatively weak compared with other currencies, and technological miracles.
Richard Schmack, a candidate for DeKalb County State's Attorney, said he found Seifried's presentation informative, but suggested that law practices can be insulated from the direct effects of a good or bad economy.
"[The economy is] not going to tell you where you're headed in terms of where your practice is going necessarily," Schmack said. "Although if we see a trend toward lower unemployment and lower real estate prices, it'll affect whether you're doing bankruptcies or doing more real estate. There's a trend in the operation of your own business, but it's mostly in the area of investments."