A major issue to this economy, Swonk said, is the current version of an energy crisis. Prices for gasoline and heating fuels are eating a higher share of household budgets. "That means for many, going to Target rather than Fields; renting DVDs rather than going to the theatre and ordering delivery rather than going out to eat," she said.
Swonk finds that with the housing market slowing down, there will be less spending on residential investment. "Spending on household items had been holding up the economy for quite a while. Refinancing has declining as well."
Swonk believes that there have been structural changes to the American economy "that will make it harder for everyone individually to advance." She adds "We are now in an idea-based economy rather than one based on manual labor." While reflecting on corporate America, Swonk said that record profits have triggered corporate capital spending, which will go to energy-saving technology and energy efficiency.
The current economy is a series of contrasts, according to Swonk. "What is encouraging is that college school enrollments have gone up." However current wages appear to be stagnant. "American households are incurring higher debt loads," she continues. She explains that when things are going well, Americans can indulge in a lot of buying power with their disposable incomes. "However, when families have to pay their own medical bills and see pension funds eliminated, that doesn't leave a lot to go around."
Swonk concluded with reflections on the government. She says the Fed will attempt to bring inflation down gradually. However, gridlock in Washington will continue. But, Swonk warns about Congress stalling on the deficit. "Time will run out."
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