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Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation
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Michael Knetter, Ph.D. - President of the University of Wisconsin Foundation

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The annual Economic Trends Event, presented by BizTimes Milwaukee, hosts a vibrant discussion between prominent Wisconsin business leaders, state representatives, and industry experts on the state of …

The annual Economic Trends Event, presented by BizTimes Milwaukee, hosts a vibrant discussion between prominent Wisconsin business leaders, state representatives, and industry experts on the state of the economy. This annual event includes a macroeconomic outlook on the economy from Michael Knetter, Ph.D., the Albert O. Nicholas dean at the University of Wisconsin School of Business in Madison.

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  • 1. Prospects for Economic Recovery Michael M. Knetter President and CEO, UW Foundation Northern Trust Economic Trends Breakfast January 21, 2011
  • 2. Forecast from January 2009 <ul><li>Stock Market: January 2009 (Obama team in place will reduce uncertainty) </li></ul><ul><li>GDP turning point: July 2009 (time needed to reverse “paradox of thrift”) </li></ul><ul><li>Unemployment turning point: January 2010 (unemployment follows output) </li></ul><ul><li>The economy has followed this projected path closely, thanks to massive stimulus </li></ul><ul><li>Our future path is still quite uncertain </li></ul>
  • 3. My 2010 Forecast <ul><li>Stock market up modestly </li></ul><ul><ul><li>Markets have priced in recovery </li></ul></ul><ul><ul><li>Downside risks remain </li></ul></ul><ul><li>GDP growth 3% </li></ul><ul><ul><li>Muted for an early recovery </li></ul></ul><ul><ul><li>Stimulus removal hurts; dollar may help </li></ul></ul><ul><li>Unemployment will end the year near 9% </li></ul><ul><ul><li>Sluggish growth; many discouraged workers </li></ul></ul><ul><li>Inflation and the dollar stable around current levels </li></ul><ul><li>Little room for error! </li></ul>
  • 4. GDP % Change (quarterly, 2007-present) Source: U.S. Dept. of Commerce: Bureau of Economic Analysis Source: U.S. Dept. of Commerce: Bureau of Economic Analysis
  • 5. Job Loss Comparison Source: Bureau of Labor Statistics Source: Bureau of Labor &amp; Statistics
  • 6. Unemployment Rate (1960-Present) Source: Bureau of Labor Statistics Source: Bureau of Labor &amp; Statistics
  • 7. My 2011 Forecast <ul><li>Stock market +7% - an average year; equity markets may benefit from shift away from bonds due to inflation fears </li></ul><ul><li>Real GDP growth +3.5% - weak considering the amount of excess capacity </li></ul><ul><li>Unemployment below 9% at year end </li></ul><ul><li>Inflation and the dollar: Low but rising inflation; established currencies decline against emerging currencies </li></ul>
  • 8. Challenges to the Recovery <ul><li>Unprecedented measures to resuscitate the economy </li></ul><ul><ul><li>Fed grew its balance sheet and created new facilities to support credit markets </li></ul></ul><ul><ul><li>Fiscal stimulus of epic proportions </li></ul></ul><ul><ul><li>Debate about usefulness of these acts </li></ul></ul><ul><li>New challenge: Reign in expansionary policy without killing recovery </li></ul><ul><ul><li>Is the US vulnerable to debt crisis? </li></ul></ul><ul><li>What source of private demand will replace government: technology investment, exports, or consumers? </li></ul>
  • 9. Risks to Near Term Forecast <ul><li>Supply shocks: Unexpected disruptions, possibly in energy or commodities, perhaps due to unrest in Middle East </li></ul><ul><li>Policy uncertainty: Continued uncertainty in how politics and regulation will affect business </li></ul><ul><li>Policy sustainability: Once markets conclude policy is not sustainable, debt issuance is very costly. Need credible long term fiscal plan!! </li></ul>
  • 10. My Long Term Forecast <ul><li>U.S. will remain among the most successful developed economies </li></ul><ul><li>U.S. economic strength comes from abundant land and capital (human and physical) and economic institutions that have provided strong incentives to take risks and work hard </li></ul><ul><li>U.S. challenges – improving alignment of incentives in finance, heath care, education; openness to immigration; and maintaining a climate where risk taking and innovation are rewarded </li></ul>
  • 11. My National Policy Wish List <ul><li>Gradual and orderly reduction in monetary and fiscal stimulus </li></ul><ul><li>Maintain our leadership position in the knowledge economy by promoting: </li></ul><ul><ul><li>Innovation </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Immigration </li></ul></ul><ul><ul><li>Conservation (fossil fuel taxes?) </li></ul></ul>
  • 12. My Wisconsin Wish List: Diversified Regional Strategy <ul><li>Manufacturing: promote in SE up to Fox Cities—proximity to major markets, multi-modal transport, etc. </li></ul><ul><li>Agriculture: promote move to R&amp;D intensive high value products </li></ul><ul><li>Knowledge/Services: promote in Dane County (bio, education) and SE Wisconsin (finance, water) </li></ul><ul><li>Tourism: promote in the north and aim high—we are competing for Chi/Mpls $! </li></ul>

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