Thanks for the real data. It clarified a good deal. Based on your argument I would say it depends upon what the Fed does, the market performance may be largely irrelevant to the overall economy. If the Fed lowers its interest rates like it should from an economic standpoint then the boom will continue. If it raises rates we will be in for a significant slump. Personal Debt is still very high and with significant unemployment the US can easily see a replay of Japan or worse which will be a big opportunity for the left. All of this is hard to evaluate because I think mass psychology is the major determing variable. I think 1987 saw a market crash with no impact in the real economy.
On the other hand, rates can be lowered and in this case I think the boom will continue. Despite Propaganda on globalization, the European and American economies are largely self--contained, more so than before WWII. A panic in SE Asia and Russia doesn't mean a panic here.
On the other hand if the Fed does nothing my prediction is that unemployment will peak at 6-7% and stay there based only on gut "feeling" and common sense. Business IS losing sales due to contraction of SE Asia Markets for computers. Also they may be losing suppliers of cheap electronic components but I have no data on this. Greenspan I think would like to raise rates and discipline labor engineering a recession. However, if he does and the recession is too bad he could easily be faced with a real militant Labor opposition, something which no doubt would scare him shitless.
One other factor is the political support for the Fed's position, namely the rentier class. If the Dow Rapidly fell another 1000 -- 2000 points Greenspan and the Fed would have to lower rates or just as the equivalent in Japan the Board of Governers would be fired and replaced. Never mind what the law says, it would be changed or ignored under such a scenario.
--mike -- Michael Cohen mike at cns.bu.edu Work: 677 Beacon, Street, Rm313 Boston, Mass 02115 Home: 25 Stearns Rd, #3 Brookline, Mass 02146 Tel-Work: 617-353-9484 Tel-Home:617-734-8828 Tel-FAX:617-353-7755