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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (3079)	5/8/2001 12:05:46 PM
From: Lee	Read Replies (1) \| Respond to of 3536

Robert, You and I are in full agreement on consumption and recession. During the past decade, if one were to look at savings being funded by capital gains + after tax income, average savings per year amounted to about $1 trillion (mostly capital gains during recent years) or about 15% of after tax income. Equities in 2000-2001 of course have not been a savings contributor to most of us. Now assume during 2001 we save 5%, versus the 15% 1990's run rate. If we assume zero capital gains that is $350 billion from after tax disposable income. That would subtract 3.5% from GDP. Add another 1.5% drop in investment spending and we are looking at a 5% drag on GDP. If the underlying average GDP growth rate is 3.5% - 4% we could be looking at a recession with 1% - 1.5% decline in GDP. That is nasty. Lee