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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Lee who wrote (2802)	1/2/2001 3:26:40 PM
From: Robert Douglas	of 3536

Lee, It’s not always clear to me the difference between a supply-induced or demand-induced recession. It's really two sides of the same coin to me. The last two years, in my opinion, we had American consumers spending about $250 billion more than they should have. I say that because I believe they were induced to spend more due to the level of the stock market and general euphoria. Now, I believe, we will have to "give" part of that back. Hence, you could argue that demand is lacking. But really, we will just have to go through a slower period of demand. This will be made up by a lessening of the huge negative net-export figure that we are incurring. It will also be helped by a $100 billion/year tax cut. There is also a capital expenditure cycle that has peaked and will result in less demand during the coming year. It too will have to work its course. Lower interest rates, a lower dollar and tax cuts will bring us out of a recession, if growth drops below zero, but the year is destined to be a slow one.

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