MONMOUTH, ILLINOIS (March 21, 2023) — Since 1989, the Monmouth Rotary Club has had an annual program focusing on the economy that helps its members attempt to make an accurate economic forecast for the coming year.
Retired Monmouth College economics professor Ken McMillan, the featured speaker at the talk for the past several years, said making an accurate forecast this year is extremely difficult.
During his speech Monday to Rotary members at the Monmouth Country Club during their bi-monthly meeting, McMillan summarized the events surrounding his most recent talks. Three years ago, he spoke during the early days of the COVID pandemic, his talk two years ago came not long after the January 6 insurrection, and Russian president Vladimir Putin's "unwanted war" had just begun in Ukraine when he spoke last year.
This year's talk, he said, will be remembered for coming just days after the collapse of Silicon Valley Bank and worries that other banks were in danger of failing.
“Most uncertain period in my lifetime”
While "inflation" was the buzzword of McMillan's 2022 talk, the word he kept coming back to this time around was "uncertainty."
"This is the most uncertain period in my lifetime," he said. "Stock-market volatility is a problem. The stock market is a thermometer of how well our economy is doing. But when it's up 500 points one day and down 500 the next, it shows that things aren't in really good shape."
That volatility, he said, has a paralyzing effect.
"If you're going to buy a house, you make a list of the pluses and minuses," he said. "But there are great uncertainties with those plusses and minuses now, and you're likely not going to make a decision.
"That's kind of where we are with the economy — the greater the risk, the less likely it is for people to act."
McMillan said that from a macroeconomic point of view, a "nothing-to-worry-about" attitude can be adopted. For example, inflation, though still at a forty-year high and ever present, is not rising at the level it was a year ago. But the microeconomic view is very uncertain.
"Microeconomics is you and me, and we're trying to decide what to do," he said. "We've got to worry about our own savings and futures. Nobody, absolutely nobody, has any confidence that they know what's going on. Uncertainty prevails."
More on the banking crisis
"The banking crisis is today's elephant in the room," said McMillan.
He shared that the Federal Deposit Insurance Corp., known as the FDIC, "guarantees individual deposits up to $250,000. Most of us are not in danger of losing any funds."
Rather, it's the individuals and corporations with far more than $250,000 set aside in banks that have legitimate concerns about the protection of their savings.
"Secretary of the Treasury Janet Yellin said there's nothing to worry about — that the federal government can make those larger deposits good and that it won't cost the tax-payers money."
But McMillan isn't so sure.
"Take that with a grain of salt," he said. "Yellin was one of the people a year ago saying that inflation wasn't that big a deal. I want to feel confident that the economy is OK. I feel better about it, but not confident."
In other words, McMillan is as uncertain about making economic predictions this year as he was filling out his now-busted NCAA March Madness bracket.