re: Do you view the recession of 91-2 as being caused primarily by the Persian Gulf War? How do you think this recession will be different?
This recession will most definitely be different. Now, I just have to figure out whether that means better or worse.
2001-2002 worse than 1990-1991:
1. global coordinated downturn
2. Japan in worse shape now, and a track record of not dealing with problems
3. this war is likely to go on and on, with no decisive final victory (in 1990, stocks soared as soon as the guns stopped firing, as the magnitude of the victory became apparent).
4. this war is being waged in our homeland.
5. valuations started the downturn at far higher levels, and are still much higher than in 1990
2001-2002 better than 1990-1991:
1. interest rates lower, both ST and LT. Coordinated global rate lowering. In 1990, the Fed Funds rate was at 8%, and 10Y Treasuries were at 8.5%.
2. inflation lower, and going down. In 1990, inflation hit 6%.
3. government begins 2001 downturn with a large surplus, allowing more scope for fiscal stimulus without igniting inflation
4. global consensus in favor of free trade and free markets more solid now than in 1990.
5. transition to Information Economy further along, (with unstoppable momentum?).
6. this war (so far) isn't being fought in the oil fields; oil prices (so far) have gone down.
Too many variables to make a useful comparison. |
