But before these investments are abandoned they will start bleeding financially. Unable to cover their costs of production they will have to cut outlays, sell their inventories for what they can get and institute lay-off. Corporate profits are falling, lay-off are on the rise, inventories are being run down and outlays are being cut. Some financial commentators are claiming that the slowdown is already as bad as the 1990-91 recession. And all of this without even a credit squeeze.
Astute observers realise that the crisis has nothing to do with Asia.
However, unable to explain it, especially in Keynesian terms, they are reduced to making statements about the inevitable end of the investment cycle, trade cycles, etc. In other words, they do not know. Even so, many still think cutting interest rates, i.e., expanding the money supply, is the cure. It's the disease. America is a dynamic and inventive country with a vibrant entrepreneurial culture.