Facing the Inevitable: A Structural Change Watch List

CHICAGO, May 10 /PRNewswire/ -- "By most measures, the financial crisis of 2008 was worse than that which precipitated the Great Depression or the bursting of the stock market bubble in Japan. The rate at which financial conditions deteriorated was particularly startling, with much of what was left of Wall Street as we knew it either failing or restructured in just seven days," says Diane Swonk, chief economist of Mesirow Financial, in her May edition of Themes on the Economy, located at http://www.mesirowfinancial.com/economics/swonk/themes/themes_0510.pdf .

In her May issue, Swonk takes a closer look at the structural changes that are likely to emerge as the cyclical recovery matures. "One lesson of the crisis is clear: what we do today sets the stage for tomorrow. We must start thinking more constructively about narrowing the federal budget deficit, and move away from our reliance on consumption toward investment and exports," notes Swonk.

Swonk's "Structural Change Top Ten List" includes:

Financial Regulation Will Increase. Lax regulation has been cited as one of the primary culprits of the economic crisis, although one might ask why we let regulations become so lax in the first place.

Globalization Will Slow, but Not Reverse. ...globalization will slow and the allocation of income from the developed to the developing world could falter a bit from the almost frenzied pace that we saw prior to the crisis.

The Federal Budget Deficit Will Widen. ...we can't keep kicking the can of fiscal reform down the road if we are to avoid the fate of Greece and excessively high borrowing costs.

Productivity Growth Will Remain Elevated. Productivity growth will remain elevated, and could even continue to accelerate as the Information Age hits its stride.

Inflation Will Supplant Deflation. ...inflation comes in many forms, and one thing that the last few crises have taught us is that periods of systemically low and stable goods inflation can be accompanied by equally high and destabilizing asset price inflation.

The Income Gap Will Narrow. Everything from the recession - which took a heavy toll on white - as well as blue-collar workers - to the reacceleration in productivity growth across more industries, should eventually help narrow the gap between the top 10 percent and bottom 50 percent of wage earners.

The Eurozone Will Remain In Jeopardy. The financial crisis exposed the cracks in the foundation of the eurozone. Now, we are facing the erosion created by the aftershocks of the crisis in places like Greece, Portugal and Spain.

"Separately, we are going to have to come to terms with our own immigration policy, especially when it comes to foreign students. We simply can't afford to keep training the best and brightest of the world, only to send them home to innovate, make their fortunes and pay their taxes elsewhere," concludes Swonk.

The May issue of Themes on the Economy as well as archived issues can be found at mesirowfinancial.com.

Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with more than $37 billion in assets under management and 1,200 employees in locations across the country and in London. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its Web site at mesirowfinancial.com.

SOURCE Mesirow Financial