Official: Most of U.S. won’t feel heat of Asian crisis

Thursday, Dec. 4, 1997 | 11:03 a.m.

The financial crisis in Asia probably won't touch Nevada's economy, but it could dent other states in the West, the president of the Federal Reserve Bank of San Francisco said.

Addressing a gathering of Las Vegas business executives Tuesday, Robert Parry said the United States is fairly well insulated from the Asian banking crisis because of the U.S. economy's robust growth and low inflation.

"We're not likely to see a big effect on national growth from Asia's financial problems, though some ... states with significant exports may feel it much more," Parry said in prepared remarks.

Two states that could feel the pinch: Washington and California, which have a high percentage of its exports targeted for Asia. Washington is home to aircraft manufacturing giant Boeing while a number of high-tech companies that manufacture parts bound for the Pacific Rim are located in California's Silicon Valley.

Parry said overall, the impact of the Asian crisis on the American economy should be minimal, around 0.2 percent. He said the impact on Boeing could even be negligible because the company has so many orders backlogged that a cancellation resulting from the crisis could easily be absorbed. As for the high-tech companies, it would be hard to gauge the size of the impact because the industry has had such a good year in '97.

Other speakers at the conference said Nevada's tourism-driven economy probably won't feel the crunch much because the financial woes won't have a big impact on leisure travel. Keith Schwer, director of the Center for Economic Research at UNLV, added that when economic turmoil impacts a region, visitors from other locations usually pick up the slack.

How greatly the Asian crisis will affect Southern Nevada is under study at UNLV and will be discussed at the university's economic outlook conference on Dec. 18.

While the number of exports from Nevada is growing, the total amount is minimal with $644 million in goods shipped to all foreign nations in the first six months of 1997.

National economic policy determined by the Federal Open Market Committee has helped protect the United States from turmoil abroad, Parry said. He credited the central bank's conduct of monetary policy for helping to achieve that result.

The Fed's job is to strike a balance between "concern over the short-term measures of economic performance and attention to the long-term goal of sustainable growth and employment and low inflation," he said. "Looking at where we are now, I think it's fair to say that our efforts have worked well for the country's economy."

Parry's appearance in Las Vegas was a primer in the role of the Fed in the economy. He shared the stage with Schwer, who offered his assessment of the local economy, and two other Fed economists, who explained changes in middle-class income over the past 20 years and how banking is changing in the digital age.

Parry predicted the United States economy would begin to cool, dropping from a current rate of about 3.6 percent to the 2 percent range next year.

The cooling of the U.S. economy will be spurred by problems in Asia, the higher value of the dollar making it more difficult for people to buy U.S. exports, and "a breather by consumers and businesses in their spending patterns," he said.

A slowing of the economy "would be in the long-range interests of the U.S.," Parry said.

Parry said his agency is working with banks to head off a computer crisis when the country moves from the year 1999 to 2000, and current computer systems are unable to make the change.

'It's a very significant issue for banks and almost every business," Parry said. "Banks and businesses are trying to rewrite (computer) programs."

The Federal Reserve is working to make sure the banks it deals with and the agency itself can implement the changes. He said the agency wants to be assured by mid-1998 that those changes will work.

BLOOMBERG NEWS and the Associated Press contributed to this report.