Tweedle dumb could force Greenspan to forestall interest rate cuts according to this article:
newsday.com
RENO ON SUNDAY
What's Worse Than
Recount? Recession
Robert Reno
YES, there is something that could take our minds off this wretched election, make it seem pointless whether the next president is a Bush, a Gore or an orangutan, even provoke us to yearn for the prosperous days when Ken Starr's petticoat-sniffing prosecutors were setting our national agenda.
We could be looking into the maw of a brutish recession.
These recurring recession watches are tiresome because they so often turn out to be false alarms. But nine consecutive years of prosperity and the longest bull market in history have inspired a notion of technology-driven, productivity-enhanced perpetual growth and created a vacuum of memory in both the markets and the population. Millions of children have come of age and entered a job market in which involuntary unemployment has become as close to extinction as it has been in the past 30 years. For all that today's investors remember how their hearts infarcted in the 1987 stock market crash, it might as well have been the one that occurred in 1929.
Still, the case for a recession in 2001 is more credible than it was when people thought a Mexican financial crisis, an East Asian meltdown or even the idiotic Y2K hysteria (to name three notable recession-provoking flops) would engulf the United States with panic.
The cautionary news started trickling in last month when the third-quarter growth rate of the gross domestic product was reported at 2.7 percent, a screeching deceleration from the second quarter's 5.6 percent. Sales of durable goods-stuff like cars and refrigerators-fell 0.5 percent in October after advancing 1.1 percent in September. Retail sales rose only 0.1 percent in October after growing 0.9 percent in September.
Payrolls rose by an unremarkable 137,000 last month, about 50,000 less than the monthly average in 2000. The manufacturing sector has lost 116,000 jobs this year. Oil prices are troublesome again. The last time they spiked so disturbingly, it helped provoke the recession of 1990-91, yes, the very one that truncated the presidency of another George Bush.
These disturbances may only reflect and portend something as benign as a slowing of economic growth, which is precisely what Fed Chairman Alan Greenspan had in mind when he raised interest rates six times between June, 1999, and May, 2000. A period of slower growth falls short of the definition of recession, which is two consecutive quarters of contraction in GDP. The anemic outlook for corporate profits in the fourth quarter, a source of the stock market's current nervousness, may only reflect a cooling from boom levels that couldn't have gone on forever.
Goldman Sachs' Abby Joseph Cohen, the queen (sorceress, snake charmer, guru, dart player, bossy hall monitor, wise and gracious aristocrat-take your pick) of Wall Street analysts, rushed to reassure clients last week with soothing words that provoked a boomlet of its own in stock prices. She told them it was clear there were signs of "economic deceleration but not deterioration." But economist Allen Sinai, one of the most respected figures in economic forecasting, Don Hilber of Wells Fargo and Stephen Roach, chief economist of Morgan Stanley Dean Witter, all put out warnings suggesting the economy may be headed for, in their words, a "rough" or "hard" landing. These unfortunate terms suggest Greenspan is an airline pilot to whom we have entrusted our fortunes and that he's bringing in his 747 in a way in which any miscalculation could send it pancaking into the mud. Maybe we should find a term that doesn't suggest we're being flown around by someone, however keen of mind, so well past the age of pilot retirement. I don't care who he is, I'm not going up in a crop duster with this man.
Anyway, with a prospective President Bush, who with a straight face promised in the neighborhood of a trillion dollars in tax cuts, Greenspan could easily be driven to another round of his annoying rate increases. With such a huge fiscal stimulus suddenly dumped on the economy, driving its growth, heating its boiler, he'd have little choice. If we are to take Bush's promise seriously, the inflationary demons Greenspan is always the first to see lurking in the bushes would suddenly make every day seem to him like Halloween. |
