ns. As the economy had grown over the last eight years, companies and individuals alike spent and borrowed wildly, convinced that the good times would not end. The Fed actually encouraged this by making the cost of debt exceedingly cheap, flooding the market with dollars looking to be put to use. Companies built and built with the expectation that the growth they were experiencing would not stop. There are two things to recall here. First, the economy is in really good shape. It's not growing very fast, and consumer confidence is down, but the most recent unemployment numbers for Northern Virginia, for example, are 1.7%. Nationally, it is 4.2%. Compare that to the miserable times at the end of the Carter years when it was north of 11%. Unemployment is rising, but the economy is not really crumbling, much as it feels that way. Unfortunately, with the overhang of inventory and capital investment, lowering interest rates will not help it. This has very little to do with the increases of last year, and everything to do with America’s collective spending habits of the boom years.With so much non-performing asset base in the pipeline, one then has to ask: Even if the Fed continues to lower rates, to whom will this credit go? If companies are already in debt up to their gills, with under worked facilities and warehouses full of inventory, then how is it that enticements to increase capital spending are supposed to help them?It won't, unfortunately. Although Greenspan and company may not have anticipated just how fast the psychology of the American consumer would deteriorate; he was warning long ago that too-high growth rates could lead to a crash. During the late '90s there was a general feeling that technology-induced increases in productivity were responsible for growth rates exceeding what economists previously believed healthy. For all of our desires to the contrary, Greenspan is not a psychic. For all of his tinkering, he could not ...
