August 1, 1998

Asian crisis ripples through Northern Colorado economy

Elections will pass, but challenges await in 1999

Twelve years ago, Colorado elected Roy Romer governor. Since then, Colorado has enjoyed steady expansion of our economic health.
While some would credit Romer˜s leadership, most would agree that overall economic health of the world and U.S. economies have placed Colorado in this expansive position.
Many of our current neighbors in Northern Colorado are new to the area and don˜t recall Colorado˜s pre-Romer days. Because of the oil-and-gas downturn in the early ˜80s, the Colorado economy was in severe straits.
Residential and commercial real estate holdings were depressed. In fact, many new high-rises in downtown Denver featured the see-through look with floor after floor without tenants or lease hold improvements. Greeley and Weld County were hardest hit, as they experienced both the oil/gas downturn, as well as poor agricultural prices.
The signs of pending change are appearing on the horizon. Romer is about to be replaced. And the long-held cyclical nature of Colorado˜s economy is about to reemerge. The high side of the cycle could quickly be replaced by the not-so-pretty downside.
Take note, Colorado residents: Japan˜s economy is in recession. Their early July election only highlighted their political inability to deal with root problems imbedded in the Japanese economy.
Immediately after the election, their currency staggered against the dollar. Because no solution is apparent, the Japanese recession is bound to deepen. Their currency will soon face even steeper declines against the dollar.
The news from Japan was followed in mid-July by an announcement of the widening U.S. trade gap. This deficit is now projected at $156 billion, based upon June˜s quarter-end results. The Commerce Department not-so-prophetically blamed the widening trade deficit on the weakening Asian economy.
According to an Associated Press report, this situation is "robbing U.S. manufacturers of sales in Asia and also opening them up to increased competition from Asian products made more competitive by the sharp currency devaluation in the region." Does anyone want to bet on the tenor of the October report?
The Clinton administration, already late in the cycle, has begun to respond. With wheat prices at depressed levels, the government has begun a program to facilitate wheat exports.
Unfortunately, these exports will go to countries without any real buying power and will compete against other countries around the world that are desperate to sell wheat to help their own economies. The end result is that U.S. wheat prices are expected to increase by 13 cents a bushel, helping the agriculture community É and our country will offer more dollars of foreign aid to buy our overpriced wheat.
On this fact alone, any U.S. citizen may begin to question this new world order.
The manufacturing economy, especially within the electronics segment, is key to the future economic health of Northern Colorado. From Longmont to Loveland to Greeley to Fort Collins, the Asian downturn of the first two 1998 quarters has adversely impacted numerous companies that are part of the critical base jobs portion of our economy.
Base-job creators spawn as many as four jobs in the economy˜s service sector for each job they maintain.
With Asian performance in the third and fourth quarters expected at levels worse than the first two, who realistically believes that the slowdown won˜t become more pronounced?
The seeds of increasing economic pressures have been planted. This summer˜s weather will likely cause prices to increase for retail food and other crop-dependent products late in 1998. The crisis in Japan will worsen and spread to China. The wild card in the Persian Gulf could erupt when least expected.
The challenge facing both our new governor and Congress — each to be elected in November — could be an economy which has lost its bloom.
Unfortunately, the challenges of a less-robust economy will not be a campaign issue. It will be relegated to becoming headlines in 1999.

Former Fort Collins mayor John Knezovich is a certified public accountant.

Elections will pass, but challenges await in 1999

Twelve years ago, Colorado elected Roy Romer governor. Since then, Colorado has enjoyed steady expansion of our economic health.
While some would credit Romer˜s leadership, most would agree that overall economic health of the world and U.S. economies have placed Colorado in this expansive position.
Many of our current neighbors in Northern Colorado are new to the area and don˜t recall Colorado˜s pre-Romer days. Because of the oil-and-gas downturn in the early ˜80s, the Colorado economy was in severe straits.
Residential and commercial real estate holdings were depressed. In fact, many new high-rises…

Related Content