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Even before the invasion of Kuwait and its aftermath in the financial markets, the economies of most industrialised countries were teetering on the verge of recession. After a prolonged economic expansion fueled by unprecedented growth of debt, strains were becoming apparent and were reflected in anemic GNP growth and dismal performance by the majority of stocks (excepting a few, highly capitalised, blue chips).

With $40 oil, interest rates kept high to prevent a further slide in the dollar, the drain of a half trillion dollar bail-out of what is laughably called the ``thrift industry,'' an incipient credit crunch induced by banks cutting back lending as their real-estate loans go sour, worrisome inflation numbers beginning to appear, a nasty bear market under way in both Wall Street and Tokyo, and new taxes thrown on top of the whole mess, the near term outlook is absolutely awful.

The consensus has been that there would probably be a recession, but that it would be a mild one. Unless I'm missing some fundamental fact or misinterpreting the data, what's coming looks awfully like a replay of 1974-1975 to me. And in that bone-crusher most companies weren't buried in debt as they are today.

This evaluation is based entirely on economic fundamentals. If a large scale, costly, and protracted war should erupt, the severity of the recession will be magnified enormously.

Editor: John Walker