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STRATFOR.com
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THE INTERNET SOURCE FOR GLOBAL INTELLIGENCE
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Being Alan Greenspan: Turning the World Right-Side Up
October 3, 2001
Summary
The Sept. 11 attacks on the World Trade Center hurled the United States into its first recession in a decade. U.S. policymakers are pulling out all the stops to engineer a recovery. The moves from Federal Reserve Board Chairman Alan Greenspan in particular appear to threaten to fuel inflation to dangerous levels. But a combination of global factors and policy savvy should lead to a sustained, low-inflation recovery.
Analysis
On Oct. 2 the U.S. Federal Reserve Board lowered interest rates to 2.5 percent, the lowest rate since 1962.
The move appears to extend what has already been characterized as a dangerously inflationary policy justified only by the certainty of a global slowdown. But the Fed's policy is far more flexible than it appears, and several factors should indeed engineer a sustainable recovery.
The U.S. economy is in the doldrums. Consumer confidence is sunk, with predictable impacts on both the manufacturing and service sectors. The United States will certainly have negative growth for the third quarter and most likely the fourth as well.
The poor state of other world economies, particularly those of Europe and Japan, leaves the United States to engineer its own recovery. Luckily American authorities have many tools at their disposal, and they are using them all.
(The Story)
Related Analysis:
* U.S. Economy Will Rebound After Hit
(September 13, 2001)
(c) 2001 Stratfor, Inc.
Dan
Turning the World Right-Side Up . . .