Aleman makes the bad economy a bit easier to swallow

A spoonful of humor helped ease the dose of bitter medicine during the Southern Colorado Economic Forum.

Like a prizefighter-turned-comedian, Eugenio J. Aleman, Wells Fargo’s senior economist, interspersed his one-two jabs of truth with humor to take the sting out of the punches.

“I have a lot of bad news for you,” Aleman told the audience. “You want the good news first? We’re closer to our recovery today than we were yesterday.”

Although third quarter gross domestic product results were, at 3.5 percent, nothing short of spectacular (bad cliché, bad writer), it was, er, the result of unprecedented federal stimulus.

“I call this growth ‘assisted living,’” Aleman said. “The amount of money we’ve put in, in order to achieve this growth, was impressive. The expenditure package created 650,000 jobs. If we divide that by the amount of money spent — each job cost American taxpayers $234,000.”

And the Cash for Clunkers program?

“Each car cost us $24,000. Some of these things have to be done,” Aleman said. “But in terms of taxes — they’re going to be very expensive.”

The nation was in a controlled recession before the December 2008 Lehman Brothers debacle, but afterward, well, Aleman said it best.

“Humpty Dumpty sat on a wall; Humpty Dumpty had a great fall; All the king’s Treasury men and all the Federal Reserve men, could not put the U.S. economy back together again.” (Insert sound of 500 people roaring with laughter.)

“Some people are worried we’ll fall on the depression side of the wall — but because of all the effort by the Treasury and the Feds, I’m afraid we could fall on the stagflation side of the wall,” he said.

Basically, Federal Reserve Chairman Ben Bernanke is “helicopter man. The Ben Bernanke action figure is throwing money out the window,” Aleman said, amid hoots and snickers. “You can drop money out of the helicopter — but you cannot prevent a recession from occurring.”

The U.S. GDP is $14 trillion per year. All the stimulus and bailout packages — committed or spent — total $11 billion, nearly 90 percent of GDP.

“We have a cushion of $11 trillion to be able to produce $14 billion,” Aleman said. After the laughter quieted, he continued, “I’m not saying it didn’t have to be done. The alternative wasn’t really an alternative.”

The housing market is improving, but is still in trouble. The nation has nine months of housing inventory — normal is four months. Home prices are starting to recover, he said, “but if inflation is on the horizon, then interest rates will go high very fast once the economy starts to recover … and the probability of a double-dip recession is high.”

Another concern is the U.S. consumer.

“We’ve been preaching to the consumer to consume. We even say we’ll pay you to consume. But whenever we don’t pay them — they go back to saving,” Aleman said, with a smile.

“All these years we’ve been telling consumers to save. Now that they’re saving — we don’t like it. We want them to borrow, borrow, borrow — we don’t want to lend, but we want to collect.”

But for those in the market to buy a home, don’t wait.

“You’ll never again get such a low interest rate — unless the government goes out of business,” he said. “Of course, you’ll have to have cash, or a friend at the bank who wants to lend you money.”

To keep the crowd from “getting depressed,” Aleman described a 2008/2009 mock Federal bailout application.

“What sector are you in? Automotive; financial services; other; not sure.

“Your annual compensation? Please round to the nearest $10 million.

“How much do you need? Round to the nearest billion.

“Do you have a business plan for spending this money? Yes; no; let me get back to you on that.

“If you’re in the automotive industry, why is your business in trouble?

“‘We’re making products nobody wants … (at this point, yours truly was doubled over, laughing so hard she couldn’t hear) … besides, it’s all Toyota’s fault.’ …”

Rebecca Tonn covers banking and finance for the Colorado Springs Business Journal.