Economist shares predictions with WEDG, Washington

WASHINGTON — Economics professor Ernie Goss gave a talk at the Washington Public Library Wednesday morning, aiming to give a room full of area businesspeople, government officials and community members a 10,000-foot view of economic factors influencing their everyday lives.

The lecture was organized by the Washington Economic Development Group. Executive Director Mary Audia said she hoped it gave locals valuable insight.

“We had a number of our investors reach out and have a lot of questions about where the economy is headed right now,” she said. “I wanted an expert to come in and talk to them about that, and have the opportunity to say what his thoughts were, what his forecasts are for the future.”

Goss opened the meeting with a few predictions. He said interest rates were unlikely to drop any time soon, U.S. Debt would likely get more troublesome as it goes unpaid, and the U.S. dollar may soon face competition from an initiative between Brazil, Russia, India, China and South Africa to implement a new currency backing international trade.

The decisions creating those factors are made far from Southeast Iowa, but Goss said they would impact every level of the economy.

While a drop in the value of the Dollar would challenge America’s financial industry, Goss said it could potentially be a boon to export-heavy businesses present in Southeast Iowa, like manufacturers and hog farmers. That’s because a less valuable Dollar means a more valuable Peso, Yuan, Peso, or any other currency exchanged across borders.

“Ag is a big beneficiary of a weak dollar,” he said. “If you’re an export industry, then you benefit from a lower-value dollar … a 10% reduction in the value of the dollar versus the Yuan just means their currency got 10% more valuable. So when you exchange it for one of our goods, a bicycle or a pig or a soybean, it comes down in price.”

Thanks to the prevalence of agriculture in the Washington area economy, Goss said local banks were likely insulated from the worst outcomes, but that those institutions should not expect government aid if the economy goes too far south.

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“If you do not pose a systemic risk to the economy, we’re not bailing you out,” he said. “You’ve got some great banks here, I recognize some of them, but they’re probably not what the (Federal Treasury) would pose as a systemic risk … Last time we had a severe economic downturn in 2008 and ‘09, we lost 40% of our community banks in Iowa and Nebraska.”

Saying interest rates could be expected to go anywhere but down, Goss forecast that people were less likely to seek out loans to move out of their homes, meaning newly built housing would take a bigger share of the market.

He cited Des Moines as an example, where the average monthly payment on a home went from $848 to $1,572 from 2020 to 2023.

“Nobody wants to leave that 3%, 3.5%, 4% mortgage to go move to Iowa City, for example, and take on a 7.25% mortgage,” he said. “So you’re stuck, I’m stuck, we’re all stuck in those mortgages that have those low interest rates.”

Comments: Kalen.McCain@southeastiowaunion.com