3
Following is the summary of the forecast.
Historical Perspective
1. The Fed has increased interest rates a number of times to ward off the potential of inflation.
The Wall Street Journal reported on 11/20/2000 that "Corporate America can expect credit
to become scarcer in the months ahead, not just from financial markets but from banks." It is
not surprising that business for banks, real estate professional and related industries showed
a marked decline compared to the prior year. Although sales remained good, the financing
side was not. Some have reported financing business down as much as 50%. On the
November 15
th
meeting of the Fed, they left interest rates unchanged. They also indicated that
they were ignoring signs of slow growth because they believed that unemployment was still
too low. Unemployment is a lagging indicator of economic activity. By the time it shows signs
of rising it could be too late to stop the county and the world from sliding into a recession.
Usually manufacturing and housing are the first to feel the effects and that has been
happening. The next is consumption. The next President should move to cut taxes ( without
damaging paying off the deficit) to stimulate the economy and the stock market. However, on
12/5/2000 according to Wall Street Journal on line " Greenspan indicated that the Fed may
end its inclination favoring higher interest rates, saying recent turmoil in financial markets has
magnified the risk of an excessive economic slowdown".
2. The anticipated negative effects of the Y2K transition did not materialize.
3. NY Metropolitan area has the lowest rate of unemployment ever.
4. The United States has continued to be the sole military and economic superpower.
5. The stock market has had a loss for the year for the first time in a decade.
6. The U.S. trade deficit surged to a record of $34.3 billion in September. An $8.7 billion
deficit with China was the largest ever recorded by any country.
7. A budget surplus continues(Historic).
8. A close presidential election and legal ramifications that was unpredicted.
9. The housing market in the region remains hot. The issue of affordable housing is brought
to an acute level despite rising interest rates. According to the NY Times, 11/19/200,
Developer "Steven A. Klar of 100 unit co-op development in Huntington Station, where buyers
must agree to price restrictions should they resell the home in the 1
st
10 years of occupancy.
"
10. A dramatic slowdown in the U.S. economy. In the third quarter the annual GDP rate rose
at an annual rate of 2.2% in the third quarter which was almost the same as the second quarter
of 2.1%. In 1999 there were quarter growth rates of over 5%. Since June of 1999 the Fed
