James, <<The economy is too strong for a recession right now... The technology sector now dominates our economy... >>
well where did you get that impression? technology dominates the S&P and Nasdaq, not the economy. it accounts for 5,7% of GDP. the rest is unfortunately still what's known now as the 'old' economy. granted, technology is the fastest growing sector of the economy. but to say it dominates is stretching things a lot. that's WS hype.
as for the possibility of a recession, allow me to point out that the economy seems to be overheating, in a crack-up boom induced by massive Fed credit creation. in such a state the economy can (note i'm not saying must) collapse into a recession very quickly, namely at the point where the accumulated debt burden by households and corporations (both now at record highs, both absolute and relative to income as well as GDP) reaches a natural growth limit, or alternatively at the point where the Central Bank begins to clamp down on further credit creation (the Fed's stated goal now if i interpret Greenspans remarks correctly).
previous crack-up booms (a term used in Austrian economics) have all ended rather abruptly,usually to the vast surprise of the experts (economists). the stock market will sense the end of the boom in advance...although it doesn't always get it right. if the market is wrong about the boom ending, it usually recovers very quickly (see 1998). if not, well look at Japan and the Nikkei.
regards,
hb |
