Expert: Problem Not Solved, Simply Hidden

LOS ANGELES-If you feel like you’re in a fog about the economy, you’re in good company. Uncertainty about the economy is so widespread that USC law professor George Lefcoe declared, “We are about to clear up the uncertainty” when he introduced opening speaker Christopher Thornberg, principal and founder of Beacon Economics, at the opening session of Wednesday’s USC Real Estate Law and Business Forum. Lefcoe said that the conference―where Thornberg shared the opening session’s comments on economics with Robert White, founder and president of New York City-based Real Capital Analytics―would explore the ‘fogginess’ shrouding the economy and offer predictions on where the recovery is headed.

Whether Thornberg cleared up the uncertainty remains to be seen, but he did provide was a better understanding of what is happening right now with the recovery and where he thinks we are headed. “In many ways, where our economy is right now is a place where it hasn’t ever been before,” he said. “While it is recovering in a strong way right now, it is recovering for the wrong reasons and is moving from a private to a public bubble.”

There is no doubt that the recession is over, he said. As a matter of fact, Thornberg said that 2010 may be stronger than people expect. But what is driving the economic recovery, he said, is the most aggressive fiscal and monetary policy we have ever seen. “This is a problem because these policies are creating a new bubble, rather than allowing us to fully recover from the last one,” Thornberg said.