Urban Land Institute Report: All We Need Is Luv and Paranoid Optimism
I may be tossing my anti-depressants after yesterday’s keynote at the ULI by The Economist former Editor- in- Chief Bill Emmott. What is going on with this global recession, are we out of the woods, and how will it affect real estate? Emmott says he has paranoid optimism that indicators are getting better — fewer job losses, maybe some hiring in the U.S., flexible economies, and exports. He called this a “LUV” recession recovery, L-shaped in Europe and Japan where the recovery will be weak; U-shaped in the U.S. because of our openess to capitalization flow, tech and environmental fever, and increases in hiring; V-shaped in China and India where there are real inflation risks. Emmott said we are in unchartered waters, with “known knowns” and “unknown unknowns”. The knowns: consumers are retrenching, concerned about damage to their wealth. Consumption will not lead this recovery. There is a huge rise in public debt, taxes are heading upwards in the U.S., U.K. and Japan. The current administration will extend the welfare state and tighten financial regulation — there is a huge pressure to regulate, with regulation almost taking precedence over the recovery. The unknowns: the psychology of the masses. Economists failed to predict this massive recession, said Emmott, because they tend to omit psychology. Unknown: how much will consumers decide to pay down debt, and for how long? China is a source of optimism but also an anomaly, a large economy with fixed currency. Biggest shockeroo of all has a Texas slant: why is oil still at $80 a barrel when demand is so low? Answer: OPEC, speculation. Rising oil prices, another unknown, could shadow our recovery.
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