By Nick Carey - Analysis
CHICAGO (Reuters) - No one knows how long this U.S. recession will last, nor how bad it might get.
But few executives who spoke at this week's Reuters Manufacturing and Transportation Summit in Chicago expect that when the U.S. economy emerges from its morass there will be the easy credit and high leverage that fueled the recent boom -- and contributed to its collapse.
"What do good times look like when we come out of this thing?" said Wick Moorman, chief executive of No. 4 U.S. railroad Norfolk Southern Corp (NSC.N: Quote, Profile, Research, Stock Buzz). "You are not going to have all that cheap credit, all of that housing activity, all of that stuff fueling the economy in the way that it has for the past number of years."
"So what does GDP look like in good times?" he asked.
Barring a few executives who were more optimistic, the answer at the summit was that U.S. Gross Domestic Product will look leaner and less dynamic for consumers and markets alike than during the housing boom -- but that may not be such a bad thing.
"If people talk about a fundamental reset in the financial markets ... that we won't go back to that kind of easy credit, then I totally agree," said General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) Vice Chairman John Rice, who heads the monolithic conglomerate's Infrastructure Technology business.
HEY, WHO TURNED OUT THE LIGHTS?
The recent boom was fueled by years of farcically easy credit -- for everything from big-screen TVs to houses -- that it will eventually spawn untold books and academic careers.
But it was only a few months ago, in the fall, that the real effects of the slowdown became evident. Railroads like Norfolk Southern had seen freight volumes drop mildly for the year when suddenly everything went south, fast.
"Someone turned the lights out sometime in November, and we saw a decline like nothing we had seen in terms of its precipitousness," CEO Moorman said. "And then it's just stayed down."
For many executives, the scale of the slump eclipses any downturn any of them have seen before.
"Obviously, we're in the middle of the worst global recession since World War Two, or at least that's what the economists tell us," said Dan Ustian, CEO of truck and engine maker Navistar International Corp (NAV.N: Quote, Profile, Research, Stock Buzz). "It certainly feels different and more severe than anything I've dealt with."
To counter the credit crisis and the downturn, the U.S. government has committed trillions of taxpayer dollars to shore up the wounded financial system and Congress has approved an economic stimulus package of close to $800 billion.
In testimony to the U.S. Senate Banking Committee this week, Federal Reserve Chairman Ben Bernanke said more concerted efforts of this ilk could bring about a recovery.
"If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability -- and only if that is the case, in my view -- there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery," he said. Continued...
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