Equilibrium — when supply equals demand — or disequilibrium, the opposite, of course, can exist in either the capital markets or in the goods markets.

Fred Crowley, senior instructor at the College of Business at the University of Colorado at Colorado Springs, was the keynote speaker at an Artemis luncheon on Monday at the Penrose Library.

Crowley gave his anybody-can-understand-economics spiel: What happens in the capital markets, he asked, when funds desired by borrowers exceed funds lenders are willing to provide? And in the goods markets, what happens if items from sellers exceed consumers’ needs, or vice versa?

Well, by the time the Federal Reserve (slow behemoth that it can be) started lowering the 5.25 percent interest rate during August 2007 to unfreeze the capital markets, it was, shall we say, a little weensy bit late.

In the interim, they continued to lower interest rates — until they couldn’t go any lower — during December, when the rates went to zero percent.

“Money is free,” Crowley said, to much laughter.

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And, during 2000 in Colorado, only 1 percent to 1.75 percent of mortgages were interest only.

By 2005, that percentage had skyrocketed to 35 percent to 40 percent — making Colorado No. 1 in the country for interest-only mortgages — “It’s important to be No. 1,” Crowley said with his famous smirk.

“If I have an interest-only mortgage (or adjustable rate mortgage), what do I know is going to happen next year?” he asked. “My interest rate is going to go up.” (And it won’t be a pretty sight.)

While interest rates have been “adjusting” (rising) on mortgages, housing prices have been dropping.

But here’s yet another reason to be grateful for living in Colorado Springs: “During the last 18 months in Phoenix, the typical house (price) dropped 40.56 percent!” he said.

In Denver, during the same time period, “typical house prices” dropped 8.01 percent.

Here’s the good news. In Colorado, “we’re at the front end and moving out” as default rates are declining, including in El Paso County.

Next, Crowley gave his lesson about “learning in two minutes” how to identify a recession.

“How many of you are spending as much money as you were last year?”

No one raised a hand.

“How many of you are spending less?” he asked. “That’s a job that’s not created, transportation that’s not needed, somebody getting fired.”

People spend less because of fear of economic conditions, and unemployment rises and the Feds lower interest rates to stimulate the economy.

And, presto — faster than you can say “parking is insane at the Incline” — the economy is in a recession.

Since the 1950s, when the Federal Reserve Bank of St. Louis started tracking this data, the simultaneous rise in the unemployment rate and drop in the federal funds interest rate has “always correctly predicted a recession.”

It’s not a bad idea to check out research.stlouisfed.org, so the next recession won’t be such a shock.

Before wrapping up his presentation on a positive note — including some close-up photos of grizzly bears with cubs and an osprey in flight from his last vacation at Yellowstone National Park — Crowley was compelled to warn the audience.

“I keep telling everyone to expect inflationary pressures down the road, and they say, ‘Ben Bernanke (Federal Reserve chairman) says …,’ but Ben hasn’t been right yet,” he said. “As the economy recovers, people will feel better and buy more. But goods and services have been scaled back (because we haven’t been buying much, remember?). We can’t produce anything extra overnight — all you can do is increase prices until supply catches up with demand.”

Inflation will likely hit during 2010 and 2011, “so now’s the time to buy real estate,” Crowley said. “But gold? Not so much.”

Signs of local recovery

And now the moment we’ve all been waiting for.

According to data from the Office of Federal Housing Enterprise Oversight, from the third quarter of 2007 to the third quarter of 2008, the average price of homes that were sold in Colorado Springs declined 2.8 percent. (Homes are tracked by address.)

During the last 24 months, the decline was 1.52 percent. And single-family home permits have started to hold steady instead of declining.

What exactly does that mean?

“It looks like it’s stabilizing around here. It’s not overnight — it takes time,” Crowley said. “But active listing of homes has stabilized — supply has dropped. And we are certainly much better than the nation.”

More than 4,000 troops returned to Fort Carson during February, and by the end of 2011, another 4,000 troops plus their “spouslings,” as Crowley affectionately calls military spouses and children, will arrive.

The total increase between 2009 and 2013 is projected to be 28,188.

Naturally, this influx will create jobs — albeit not “primary” jobs, which El Paso County needs — that pay an average of $35,373 annually, but, as Crowley said, “That’s better than nothing.”

Rebecca Tonn covers banking and finance for the Colorado Springs Business Journal.