THE UNDERESTIMATED RECESSION WILL BE LONG AND SEVERE

Mount Kisco, NY, January 26, 2001— Recession, which began in November, will not end, at the earliest, until 2002 and will have unfortunate consequences that will last for years, according to the latest issue of The Levy Institute Forecast and Macroeocnomic Profits Analysis. The “underestimated recession” is a product of long-developing imbalances between the size of the economy and the magnitude of its debt and fixed assets, asserts the Levy Institute Forecasting Center, which publishes the monthly report.

“The current situation also has a particularly threatening feature: the pathologically inflated corporate equity market,” notes the Levy Forecasting Center. The economy’s total asset value relative to income is much greater than on the eve of the 1989-93 period of financial trouble, when the 1980s real estate bubble was coming undone. The economy’s vulnerability to a stock market decline is unequaled in U.S. history, according to the Levy Forecasting Center. “Overall, the present situation involves the most formidable financial dangers since the 1930s.”

Since recessions are always at least several months old before they are commonly recognized, it is not surprising that debate is underway about whether the economy is experiencing a soft, bumpy, hard or crash landing. The Levy Institute Forecasting Center invokes a metaphor it coined in the 1950s, to describe the transition from prosperity to recession: “When a long train rounds a curve, the locomotive completes the turn while the caboose is still traveling in the orginal direction. Similarly, some economic activities have begun to contract while others are still expanding.”

David A. Levy, director of the Levy Institute Forecasting Center, reminds readers to “Respect the danger of the developing financial and economic storm.”

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The Levy Institute Forecasting Center’s list of 10 developments to watch in the early ‘00s:

1. 2001 profits decline will be steep.

2. Recession and financial crisis abroad will last longer and be more severe than in the US.

3. Economic woes in countries such as Japan, China, and Russsia may have political consequences.

4. As the recession deepens, the record US trade deficit may impact trade and international relations.

5. The recession will have a domino effect that will cause a 2-3-year long credit crunch.

6. Modest deflation in goods and services prices may develop by 2002.

7. Interest rates will plunge.

8. Federal fiscal policy, especially income tax rules, may have a major effect on the economy of 2002.

9. The timing and extent of the consumer pullback will affect the depth and duration of the recession.

10. People may discover that the Fed is not omnipotent.

-- kevin (ktross@mailcity.com), January 28, 2001

Answers

A breath of clean, unpolluted, fresh air to penetrate the smog of Easy Al Greenspan. He just said the threat of a recession is remote and that an income tax cut will help prevent congress from spending the government surplus! Say what? Way past time to get rid of Al & the Federal Reserve. It and the "income tax" were the two biggest frauds of the last century. With Social Security coming in third. Where is the OUTRAGE?

WRK

-- Warren Ketler (wrkttl@earthlink.net), January 28, 2001.

The herd never stirs until the grass grows thin.....

-- Will (righthere@home.now), January 29, 2001.