The United States economy has downshifted, but is moving ahead nicely. Economics, in the long term, may be a "hard"
science, with mathematically determined relationships. But in the short term, it's a behavioral science like psychology and
sociology, and one can't help but admire the masterful grasp the Fed has over these twin aspects. Their handling of interest rates
this autumn both provided the necessary control, and at the same time communicated their resolve to do whatever is necessary to
keep the system operating well.
But make no mistake, this is not 1997. The world is interrelated more tightly than ever, and we cannot progress too far ahead of the
rest of our fellow passengers. Our factories are turning more slowly because major parts of the world are in very difficult economic
times, and are buying less of our potential output. Our producers are being squeezed as desperate overseas producers try to
stimulate sales with bargain-sale prices. The underlying strength of our economy, however, will prevent this spiral from progressing
too far. A recession will not develop and within 12 to 18 months the pace of growth will begin to pick up again.