The slowdown has been touted as a New Economy phenomenon. One need only scan the Wall Street Journal to know that many Old Economy companies are suffering varying degrees of pain. The U.S. financial position is precarious. One third of syndicated bank loans are reported to be junk quality. The recent Xerox example could be just a sample of the riskiness of this exposure in a prolonged recession.
Central banks are still lenders of last resort.
This may give comfort to borrowers, but perhaps not to holders of central bank-issued notes. Confidence often dies hard. In the spring of 1930, Walter Chrysler predicted that 1930 would be a record year for car sales. The gold market may soon take heart from recent statements from those in the know. As a prelude to aggressive monetary expansion Japan s Finance Minister warned that government finances were on the verge of collapse.