This post was written by Trisha Riggs, vice president of communications for ULI.
"Paranoid" optimism--a belief in the ability to overcome the negatives that could be coming--may be the best attitude to take regarding the economy’s recovery, according to renowned economist Bill Emmott. The former editor-in-chief of The Economist provided a global economic outlook during yesterday’s opening session of ULI’s Annual Fall Meeting in San Francisco.
Borrowing an analogy from former U.S. Department of Defense Secretary Donald Rumsfeld, Emmott said that moving from recession to recovery might best be analyzed by considering the "known knowns" versus the "known unknowns."
Among Emmott’s known knowns:
- An economic recovery is underway to some extent in most countries, with the rebound in the U.S. and Western Europe being more gradual while China and India will be more immediate.
- Economic globalization and openness to cross-border trade has remained intact. "We are seeing some sense of global sharing of the rebound," Emmott said.
- A continuation of the fiscal stimulus in the U.S. and Western Europe helps to keep the momentum going.
- An acknowledgement that consumers remain cautious and that consumer spending will not lead the recovery.
- The likelihood that more government-funded programs will be created in the U.S., China, and Japan.
- The likelihood of tighter financial regulation in the U.S. and the U.K.
Among the "known unknowns":
- The extent to which consumers and corporations will pay down debt.
- How quickly eliminated jobs will be recreated.
- How quickly the value of Chinese currency will be re-evaluated in relation to the dollar. Quicker re-valuation so the currency is not artificially low would benefit world trade and revive U.S. exports, Emmott noted.
- The future of oil prices, which as yet have not reflected the global recession.
The known unknowns, Emmott said, have created a course of "uncharted waters" that could change the character of the economic recovery. His reasons for optimism: a belief that job growth will occur sooner rather than later; faith in the flexibility of the economy, particularly that of the U.S.; and encouraging prospects for U.S. exports.
"Be realistic but positive," he advised ULI fall meeting attendees. "There is much we do not know, but new situations bring as many positive possibilities for growth and change as negative ones. Paranoid optimism is the right feeling to have as we move forward."
