I've tried accessing the Sunday London Times for an article. The "US is already in a Recession". Tidbits of the article Also Bank of America is predicting the Euro/ US dollar parity within six months. The link i have won't work. Not sure if it's my end or not. http://www.sundaytimes.co.uk/news/pages/sti/2000/12/24/stibusnws01030.html

-- kevin (ktross@mailcity.com), December 24, 2000

Answers

Kevin

Strange indeed. I have tried various search engines plus the times url. No success at all. It must be a problem at the Sunday Times.

-- Martin Thompson (mthom1927@aol.com), December 24, 2000.

Kevin:

Try the Jeff Rense site. It's posted there today. Pretty much a blinding glimpse of the obvious. The signs began to appear last March. Funny no one mentions as part of the cause the enormous expenditures to fix y2k problems which were essentially sunk costs. In some cases companies which tried to achieve some improvement in efficiency in the process ended up buying more grief, e.g.,Hershey, MultiFood, Royal Doulton China, etc. Maybe XEROX too.

Warren

-- Warren Ketler (wrkttl@earthlink.net), December 24, 2000.

Kevin, go here and click on the "Business" button.

December 24 2000 BUSINESS NEWS

America 'already in recession' say economists

David Smith , Economics Editor

American Account - Irwin Steltzer

FEARS of a hard landing for the American economy, with serious consequences for Britain and the rest of the world, have heightened, despite a recovery on Wall Street on Friday.

One leading American economist says America is probably already in recession, while others warn that even an aggressive cutting of interest rates by Alan Greenspan, chairman of the Federal Reserve, will be insufficient to head off a hard landing.

John Makin of the New York-based Caxton Corporation, says that "the United States has probably entered a recession".

"Over $2.5 trillion (£1,700 billion) - a year's worth of average wealth creation during the great expansion of the 1990s - has already disappeared in the US since March," says Makin. "The loss of wealth is erasing demand growth, thereby exacerbating the underlying excess capacity problem, which, in turn, leads to more wealth loss. The US economy is on a dynamically unstable downward path."

Other economists are also bearish about America's prospects, after earnings warnings from leading companies and a sharp drop in business and consumer confidence.

"An ongoing deterioration in technology has an immediate and discernible knock on overall economic growth," said Neal Soss of Credit Suisse First Boston in New York. "A slowdown in tech spending causes multiplier effects that are likely to be substantial, particularly via the stock market."

CSFB says that as well as lower interest rates - it predicts that the Fed will cut by 0.75 points during the first half of the year - the economy will need big tax cuts from the new administration.

Economists at HSBC - which topped the table for this year's most accurate forecast of Britain's economy - say that even if there is a policy response, it is unlikely to prevent a hard landing in America.

"There can be no doubt the Fed will act aggressively," said Stephen King, global chief economist at HSBC. "But these rate cuts will provide little immediate respite. We stick by our view that by the second half of 2001 the US will be in true recession."

The Nasdaq index of mainly technology stocks closed 177 points higher at 2,517 on Friday, still under half its peak level in the spring, and down on the week. The Dow Jones industrial average rose by 147 points to 10,634.

The fact that America's sharp weakness coincides with the long presidential changeover period means that any policy response will be delayed. The Group of Seven finance ministers and central bankers has scheduled a meeting for February 16 in Italy, by which time the Bush administration will be in place and, say analysts, the Fed will already have started to cut interest rates.

Predictions are being made for a cut in American rates at - or even before - the next scheduled meeting of the Federal Open Market Committee on January 31.

Advisers to Gordon Brown, the chancellor, last week held meetings with Larry Lindsey, likely to be head of Bush's council of economic advisers. The Bush team is worried both at the extent of the slowdown and the sharp rise in energy prices, particularly for gas.

Although an American hard landing would hit growth in Britain, there will be some silver linings. A cut in base rates will be on the agenda for the January 10-11 meeting of the Bank of England's monetary policy committee, following the vote for a reduction by two of the MPC's nine members - DeAnne Julius and Sushil Wadhwani - earlier this month.

Although few analysts expect a cut at the January meeting, the momentum for lower rates is expected to build. A survey of analysts by Ideaglobal.com, the financial-research company, shows an average expectation that the Bank will cut base rates to 5.5% from the present 6% during 2001.

The timing of any cuts will depend on a trade-off between what the Bank sees as worrying strong consumer demand in Britain and the chill blowing in from overseas. Christmas and new year retail spending will provide the key, after figures last week showed the saving ratio dropped to a new low of just 3% in the third quarter.

The other bonus for Britain could come with a fall in the value of sterling against the euro, which would help exporters. The euro continued its recovery against a weaker dollar last week, closing above 92 cents. Forecasters expect the fall to continue. Bank of America predicts that the euro will hit parity with the dollar within six months.

Sterling, which has traded as high as the equivalent of DM3.43 this year, has already slipped back to DM3.15, and is set to drop below DM3 within the coming weeks.

Despite fears over the outlook in America, economists remain optimistic about prospects for Britain. Growth forecasts have been downgraded, but only modestly.

The Treasury's latest compilation of the views of independent forecasters shows an average expectation for growth of 2.6% next year, after 3% this year. Inflation is expected to remain below the government's official 2.5% target, while unemployment will end the year close to the present level of just above 1m.

-- Rachel Gibson (rgibson@hotmail.com), December 24, 2000.