Definitely a recession which I have said was coming over 6 months ago and it's not an inflationary one but a deflationary one. If you thought about it, it was pretty obvious. Technology is great and it moved us further along but it was also its own downfall. we get cool toys that make things faster and better and more efficiently, which was part of the productivity miracle. But at the same time, because of increased efficiency it reduced to level of profit margin to razor thin levels that really allows for no mistakes. In a sense, companies eventually are competing each other to death. This was the biggest elemant in the fall of the dot coms, because technology reduced the barried of entry to doing business to almost nothing. The problem here was that with too many competitosr, no one could make a profit and the money spent in advertising and capacity expansion was never recovered and never could be. hence, mass failure which is based on technology. The same is now being felt in the larger caps. Overcapacity needed to keep up with capturing market share and rising demand eventually hit a bump and it was just big enough to throw eventhing into a bind. Once demand is satieted, all that extra overcapacity now becomes a wasted expense and profits fall, inventories build up, and the economy falls into a spiral as the cascading effects of lay-off, reduced profits, lower earnings, etc, continue to cycle.
America's growth engine will not be put back on track until all this washes out of the system and there are no signs of the washout ending soon. in afct, it is still building on itself. |
