Diane Swonk is the chief economist and senior managing director of
Mesirow Financial, a diversified financial services firm headquartered in
Chicago with $32.2 billion in assets under management. Her job entails working
internally and externally with clients to manage economic risk.
She was previously chief economist for Bank One, and has served on
several advisory committees to the Federal Reserve Board and its regional banks,
and on the Council of Economic Advisors for the White House.
Widely quoted in the leading business press, Swonk spoke with
HardAssetsInvestor.com recently about the global economic outlook and the future
for commodities.
HardAssetsInvestor.com: Things feel pretty uncertain out there.
What's your outlook for the U.S. and global economy in general, as well as the
stock market and commodities?
Diane Swonk, chief economist, Mesirow Financial: There is a
bigger risk to the economy than to the stock market at this stage in the game.
The environment particularly in the U.S., but also in other countries, is that
wages have been constrained while commodity prices have soared. In other words,
companies have increased their productivity to offset the rising costs of
commodities. That has allowed for a better maintenance of corporate margins than
personal income, so it's been a better economy for Wall Street than for Main
Street.
That said, we are seeing weakness in the U.S., and the whole idea of a
"decoupling" of the U.S. and external economies is being debunked. Most of
Europe is now following the U.S. in the economic slow-down with a two-to-three
quarter lag ...
That's important because Asia has been shifting from a reliance on the U.S.
to a reliance on Europe to drive economic growth. So, with Europe weakening, you
will start see the weakness Asia with a lag as well.
HAI: But the Asian economies continue to chug along, demanding and
consuming huge amounts of commodities?
Swonk: Yes, but we are starting to see an impact of high
commodity prices there too. Many of the commodity producing countries and some
of the big consumers like China, who have long subsidized energy prices, are
starting to lift those subsidies. Ultimately that will impact demand---we will
see the demand destruction capabilities of higher prices take hold.
HAI: Are there any parts of the world that are better positioned than
others economically?
Swonk: It's a global economic slowdown with the exception of
the Middle East, where the economies continue to accelerate in response to
higher oil prices. Latin America also is doing reasonable well, with the
exception of Argentina, which is likely to implode upon itself ... and revalue
their currency, likely in the early part of next year.
Beyond that, some Central European countries like the Czech Republic and
Poland are doing better than the rest of Europe.
