Thoughts On The Economy for the Year 2000

In the 33 years that I have been writing and publishing these reports the condition of the economy has rarely been the central issue. The inflationary years of the late 1970s and early 1980s were such a time; the remarkable economic expansion that began in March 1991 and gives every indication of continuing is another. Even though the current state of affairs prompted two reports last year – the more important of which was Vol. 1999-8 by a Mr. Chissom – it struck me that another look, from a different direction, is called for. Accordingly, I was delighted when a long-time friend and nationally recognized business economist – John M. Godfrey – agreed to offer his thoughts on the present economy.

Dr. Godfrey was the chief economist of Barnett Banks in Florida for 14 years, from 1981 until 1995, during most of which time I was a member of Barnett’s board of directors. It was then that we met, and often worked together on various important matters for the company. Before coming to Florida, John (I have difficulty staying with formality in view of our long friendship) spent 12 years at the Federal Reserve Bank of Atlanta as Research Officer and Senior Financial Economist. For the past five years he has been the Principal in Florida Economic Associates in Jacksonville. He is best known for his work on national and regional economic conditions, banking, and monetary policy.

John’s report follows. I enjoyed, and profited from, all of it. Readers who may have had trouble understanding Washington’s near deification of Fed Chairman Alan Greenspan will be enlightened. It has also occurred to me that the report, particularly in Section III, helps explain much of what is happening in Washington today with respect to the supervision and regulation of financial institutions, although that subject is not addressed. For in this report, Mr. Greenspan is accorded the lion’s share of the credit for preventing an early end to the expansion in 1995, and for assuring its continuation to the present day. Personally, I have no reason to quarrel with this assessment to any important degree, but it also has a dimension not always understood.

The inability of Congress to distinguish between central banking on the one hand, and the supervision and regulation of banks and other financial institutions on the other, is well known. The first is uniquely the responsibility of the Federal Reserve; the second – much different – is shared with a cluster of other regulatory agencies, all of which are recognized as at least the equal of the Fed in terms of expertise and experience. But the success achieved by the Fed in its capacity as central bank makes it exceptionally difficult to challenge when, under Mr. Greenspan’s leadership, the Fed seeks to expand its role as a regulator, particularly at the expense of the other agencies. The result can be seen in the recent Gramm-Leach-Bliley Act.

Carter H. Golembe

January 25, 2000