Published Together: The Three Legged Stool of economic growth and the effects of the current crisis

As someone who was part of a team of creatives, business leaders, education institutions, and philanthropists, we all banded together in what can only be described as a midwife-of-a-situation to bring Rapid Growth, a solutions-based journalism magazine to life in April 2006. 

Since that time we have had many creative folks work alongside of us as we sought to bring unique stories to our community but also those looking at our city as a destination for fun, relocated for work, or a place simply to call home. 

And for nearly 15 years on each Thursday morning via your email we have alerted you that there are a few stories of locals making something happening that we think our audience would enjoy. (And you have as we see our numbers still rising.) 

As I look back on my role as publisher since 2015 and how much change has happened here, one area I enjoy in this role is the opportunity to talk to people in our community at all levels of our society. I am easy to talk with on almost any topic and always leave encouraged even when we don't agree that healthy dialogue is critical for our society.

So as we face an unprecedented time in our planet's history that is impacting so many lives, we decided to leverage our community-partners in dialogue to produce a series of stories that reflect our time together. 

Please welcome Brian Schwartz, CFA and Co-Founder of Eighty-five Miles.

-Tommy Allen, Publisher

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As a student of the markets and former adjunct professor of economics at Grand Valley State University, I’ve been keeping a close eye on what’s happening in the financial markets.  It’s what I love to do and was fortunate to have a great career in New York City from the early 1990’s until moving back to Grand Rapids in 2014. People have asked me numerous times over the last few weeks “is this like The Great Financial Crisis in 2008 – 2009?” My answer has always been “yes and no.” Vague, I know but each event while similar, has its own nuances. The prior crisis was caused by a housing bubble.This crisis as we well know is about an invisible infection. Here’s a simple Q & A explaining what’s happening: 

Q: Why has the stock market gone down so quickly?
A: When it became clear that this virus was not the flu, strong leaders including Governor Whitmer issued executive orders to limit social distancing which also included working environments. With businesses reducing staff or completely closing, investors quickly realized that this would negatively impact the economy. In simple terms, the stock market is a mechanism which forecasts future economic growth and when the economy is growing, stocks go up. When the economy is in decline, stocks go down.   This stock market decline was so swift and deep because the economy has gone from 70 miles per hour to zero overnight. In my 20+ years on Wall Street, I have never observed such a sudden move and one that could last for months.

Q: What are the economic roles of the U.S Treasury, Federal Reserve and Congress/President?

A: From an economic perspective, there are three levers to pull to spur economic growth and each has its own important role. The Treasury Department is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. The Department is responsible for a wide range of activities such as advising the President on economic and financial issues, encouraging sustainable economic growth, and fostering improved governance in financial institutions. It is the keeper of our currency and debts. The Federal Reserve’s role is to use its vast toolkit to maximize employment while minimizing inflation. Today, its main responsibility is banking oversight and making sure that the banks can lend and keep our savings safe. Lastly, the Federal government’s role is immense. To stimulate growth and protect our economy, Congress and the President develop laws focused on taxation and job creation.

Q: What has been done so far to protect the economy and my job?
A:  Short answer … A lot and more to come.  In order to make sure that banks can keep credit flowing, the Federal Reserve is actively buying certain financial assets from the banks, ensuring that billions of dollars are available to borrowers and savers. Of the 15 or so tools available that were mostly developed from the 2008 crisis, they’ve only used a handful. The Fed will actively respond to financial stress if observed. Just yesterday, the Treasury and the Fed announced the re-introduction of a successful program from 2008 that will ease stress in the corporate, municipal, auto loan, and student loan markets. There’s more to come. Trust me. Lastly, we are waiting for Congress to pass a large and comprehensive fiscal program to protect employers, its workers, and the economy as a whole from near-term economic stress. In Michigan, small businesses can now work with the Small Business Association to access low interest loans up to $2 million.

There are many nuances associated with each of the three legs of the stool and for our economy to survive COVID-19, the Treasury, Federal Reserve, and Congress/President must all work together. Each leg has its own importance, but collectively the sum is greater than each of the parts. Lastly, citizens must take the health crisis seriously because if the virus curve can’t be flattened, none of the fiscal or monetary actions will matter.
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