Table of Contents
Cover Story:
Only Time Will Tell
A look ahead at what 2007 will mean for Rockland
Feature Story:
How Will He Do That?
Hector May has big plans for the RBA
DEPARTMENTS:
Economics Roundup
• The Smart Investor
Try a financial diet in 2007
• Economic
Viewpoint
Coming to America or conundrum continued
Business Roundup
• Office Efficiency
Streamlining office operations through lean processes
• Marketing By Design
Branding your image - it's not just for the "big" guys
Ask The Experts
• Business Start-ups
Getting your basics together
• Is It Tax Season Yet?
Your tax questions answered
Retail Round-Up
• Feast or Famine
Taking the pulse of the local restaurant biz
• In The News
Invest in Your Community
• Heart of a Lyon
Former Jet delivers an inspirational message
• Family Shelter Honors
First-ever program recognizes community contributions
Odds & Ends
• From The Publishers
• PR Patter
Dedicated Section:
Rockland Business Association:
The President’s Desk
All in all, it was a very good year
Handing Over The Torch
Annual membership luncheon introduces new RBA board
RBA Happenings
• Committee and Council Info
• Calendar of Events
• New Members
Economic Viewpoint:
Coming to America or
"Conundrum Continued"
By Bruce W. Mason
Dollars are coming back to America as never before. Foreign investors continue to reap huge profits from exporting goods and oil products to the consumption based U.S. economy. The U.S. current account deficit is running at a record figure close to $800 billion a year. These funds, by and large, recycled back to the U.S. in the form of investment. Almost $3 billion a day is coming to, and being invested in, America. Foreign central banks and investors are buying everything from U.S. Treasuries, U.S. Agencies, corporate bonds, equities, commodities, real estate, and purchasing companies outright. These inflows are changing who owns America.
If Alan Greenspan were still Chairman of the Federal Reserve he may giving a speech entitled “Conundrum Continued”.
One might recall Chairman Greenspan using the word “conundrum” to exlplain why in the course of the Fed raising interest rates 17 times for and increase of 425 basis points, the long-term U.S. Treasury yields actually fell. The explaination for this opposite move in the direction of interest rates can be explained by the increased demand for U.S. Treasuries. Never before has so much foreign money been invested creating a dependency on external capital. U.S. Treasury statistics indicate currently, foreigners now hold over 50% of the entire federal debt held by the public. Foreigners hold more than $2 trillion of total U.S. debt today, up from $1 trillion in December 2000. Foreign investors have been financing 80 percent of the increase in the U.S. Budget deficit, (which is now running at $250 Billion).
One thing these inflows of cash have produced is a “flat yield curve” (an interest rate yield curve showing the same yields for short-maturity and long-maturity bonds). The sheer appetite for U.S. assets, especially U.S. Treasuries, has kept interest rates artificially low. The global imbalance has served as a mixed economic blessing with the loss of millions of manufacturing jobs on the one hand. On the other hand providing cheap products and low inflation along with low interest rates, has directly fueled the affordability of home mortgages and the resulting boom in housing values throughout the U.S. Commercial real estate activity has also been bolstered by these relatively low interest rates and by strong local economies with employment numbers that continue to beat both the state and national levels. For now American assets are in demand, and will continue to be bought by foreign interests. RBD
Bruce Mason is the Chief Economist, Asset & Liability Manager, Information Security Officer and Assistant to the Chairman of the Board of Union State Bank.
