Consumers are spending money again, not sitting on it out of fear.

Consumers are spending money again, not sitting on it out of fear.

Meanwhile, we're not that concerned about paying down debt anymore. Interest rates will stay low. Unemployment will continue downward. Housing prices won't be going up soon. And the gross domestic product is looking rosier.

These are the bold predictions of advanced economics students at Southern Oregon University who were tasked with doing immense amounts of research and forecasting the economy — a job at which, for the past 10 years, they've proved the equal of the big forecasters.

"It's an honest, sustainable recovery now. We're out of the woods," student Paul Jenkens said Thursday in summing up their forecast at a presentation.

The forecast can be found online at www.sou.edu/econ/forecast.

The predictions go beyond those of the Federal Reserve, the Survey of Professional Forecasters and IHS Global Insight — but after jumping the gun on the recovery in recent years, those forecasters are being more cautious, said economics Professor Dan Rubenson, who has guided economics students through the forecasting project for a decade now.

The big forecasters have been more conservative on GDP and consumer spending, but SOU forecasters have been borne out with improvements in those areas in recent months, said Jenkins. Consumer spending and housing prices hit average people closest to home, said student Katherine Gohring.

"People are spending more. It's a big positive," she said. "Unemployment numbers are starting to move in the right direction."

The students stressed that, instead of the vicious cycle of the crash of 2008, things are now in a "virtuous cycle" where more consumer confidence creates more spending and less saving, which creates more jobs, which allows more business investment and more personal income — and before you know it, it's not a recession anymore.

As for the other big personal measurement of prosperity — housing values — Jenkins said there's such a huge inventory of foreclosed houses (not on the market) that it will take years to shrink the supply, eventually increasing demand and feeding housing values.

The economy is trying to work its way out of a "liquidity trap," in which, with such low interest rates, people have felt it's best to hold onto their cash, a situation the Fed would like to reverse but can't, unless it finds a way to penalize you for saving, said student Jordan Highland.

The Fed has an excess money supply, which it's putting in banks — and they have to lend it out before people have spending money, said Jenkins, noting that "corporations are sitting on massive cash reserves like they've never seen before."

The students predicted the value of the dollar would improve against foreign currencies, but eventually decline, a situation which cuts both ways because when the dollar declines, American goods are more of a bargain overseas — and that creates jobs. When the dollar is strong, they said, we buy more foreign goods.

The students retraced the history of the recent crash, which they called the worst in living memory, noting the big triggers were the 9/11 attacks and the deregulation of markets in the 1990s, leading to an unsustainable housing bubble, with its shaky derivatives.

Tax cuts and stimulus money, now gone, saved the day — and the federal government, which can deficit spend large amounts, was the only entity able to pull off such a feat.

John Darling is a freelance writer living in Ashland. Reach him at 541-482-3636.