Recession, American style?

While we’ve been looking north at Japan’s economy, some hairy storm clouds have been gathering to the east. Uncle Sam’s economy has started to rain layoffs, worries, and business closures. Worse yet, the overall financial system appears to be entering a Big Chill.

At first, it was just the dot-com world that looked shaky, and nobody was much surprised by that. Too much froth on the hype on the bubble.

Big deal. Not too many tears were shed for the dot-com crowd.

But the trusty, rusty manufacturing industry has started to moan the blues, and the low tech and the high tech are now providing an economic rock and an industrial hard place. Caught in between is just about anyone who works for a living. Which would be, by the way, the same anyones who buy Saipan’s garments.

Which is a bummer in its own right, but the underlying financial system is getting spooked, and that’s a super bummer. When the Federal Reserve chopped interest rates, most of us expected the ripple effect to stimulate lending…and therefore borrowing…and therefore industrial activity and along with it jobs, incomes, and the whole happy economic enchilada.

Oops. Hold on a minute, fella’, we’ve got a problem: Pushing on this financial string didn’t work.

Which is to say that banks and other moneylenders didn’t march to the tune of conventional wisdom. Faced with stressed out debtors, they’re none too anxious to start loaning gobs of money. A sagging demand for loans is one thing…but a sagging supply of loans along with it is the stuff that migraines are made of.

The economic spider web that ties us all together means that when Uncle Sam falls, Japan gets pulled down, too. After all, the U.S. is a juicy market for Japanese exports (and for ours), and it’s not too difficult to connect the dots on this emerging picture. An American recession looks just a shade shy of inevitable, and nobody—nobody at all—can predict how rotten and long it will be.

To chronic worry warts, some hidden problems mean that small fires can spread quickly in America. Will consumer debt come crashing down on everyone’s head, as families that borrowed during good times get zapped during the bad? (It sure could happen). Wouldn’t this put more weight on the shoulders of manufacturers and retailers? (You betcha’). Aren’t higher energy prices a further threat? (Boy, are they ever).

Of course, Uncle Sam’s financial fortunes have zoomed over the years, so even a moderate recession is happening from a pretty lofty base. The U.S. economy isn’t going to die like a boonie dog (Japan’s might, but not America’s). Still, the Commonwealth isn’t going to find any easy economic freebies in 2001, Korea’s strong growth and tourism activity notwithstanding.

In other words, the year 2001 is going to be another challenging one. On the bright side of the coin, our Washington relations look better, and Uncle Sam’s deep pockets will continue to send a lot of jingle this way. Americans will still buy garments, and the Japanese will still travel. But the competition in these realms is going to get even tougher.

Ed Stephens, Jr. is an economist and columnist for the Saipan Tribune. “Ed4Saipan@yahoo.com”