To: Little Joe who wrote (133380 ) 3/25/2001 12:03:38 AM From: Kevin Rose Read Replies (1) | Respond to I don't pretend to be an economist, but a lot of the economists I've seen on CNBC seem convinced that, when you look at forward indicators, inflation is not the current crisis. What Greenspan seems to fail to understand is that the economy has changed in the last 5 years. Now that 50% of the households in America invest in the stock market, there is a hard link between the performance of the stock market, consumer confidence, and the economy. The wealth effect has created that link. Now, when the stock market plummets, so does consumer confidence, which directly impacts consumer spending. Also, the people affected are the same ones making the corporate spending decisions; when they get hurt in the stock market, they get scared at work. They become naturally more cautious, which snowballs into corporate america with astonishing speed. Did you see how fast corporations cut their spending? Literally in a number of weeks. It snowballed through vendors to suppliers, and we're in a mess.
