US ECONOMY: RECESSION OR MOMENTARY HICCUP? FOR ONCE, SOROS IS RIGHT

In recent weeks, conflicting reports have appeared about the United States economy. This motor of the world’s financial markets has only to have a brief hiccup for the markets and players to enter abject panic and for reflex knee-jerk reactions to reverberate around the globe.. As those who love to hate the USA rub their hands in glee at the prospect of a recession and those who love to love the USA deny that there is any question of a recession, where does the truth lie? The fact is that Alan Greenspan has twice reduced the interest rate stipulated by the Federal Reserve Bank this month in an attempt to kick-start the economy into expansion. The fact that he has moved twice in a month catches the attention not only of Pravda.Ru but also of George Soros, that scourge of the financial markets, described as “Dracula” by an organiser of the protest against globalisation, Weng Tojirakan: “We regard Mr. Soros as a Dracula…he sucks the blood from the poor. If speculators like him had some ethics in their minds, our situation would not be so bad”. Soros, it will be remembered, was responsible for Britain’s ejection from the European Union’s Exchange Rate Mechanism in 1992, due to his continued speculative attacks against the pound. So what is the position of Mr. Soros in the present debate as to whether or not the US economy is entering recession ? He challenges Mr. Greenspan’s claims that aggressive cuts in the interest rates will cause the US economy to spring back into growth and stave off recession. “Most likely, we are in recession right now”, said the Hungarian-born Soros at the World Economic Forum at Davos this week. “The FED is aggressively reducing interest rates. I don’t know how much they need to move. They don’t know how much they need to move.” He said he thought the FED had probably over-reacted in their interest rate cuts and that recession was more than a slight probability. In this event, Soros agreed with other market players that in the event of a deep recession in the USA, the Japanese, Korean and Singapore markets could collapse. As one reads the economic indicators from the USA, one finds conflicting evidence. One moment, we read that in the last quarter of 2000, the growth of the US economy was 1.4%, the slowest since 1995, according to the US commercial department. The next moment, we are confronted with the figure that GDP is up 5% in 2000, the highest rise since 1989. We will find the answer to our question probably somewhere in the middle, as usual, but taking into account internal and external factors, the global result is not optimistic. Internal private consumption has decreased 1.6% in the last year and the balance of trade has fallen 4.3%. Whatever happens, President Bush cannot be blamed because the indicators started to show signs of alarm at the end of President Clinton’s administration.

TIMOTHY BANCROFT-HINCHEY PRAVDA.RU LISBON