The Magazine


Feb 16, 1998, Vol. 3, No. 22 • By DAVID M. SMICK
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Washington remains calm and confident, oblivious to the fact that the American economy often looks strongest just before a slide. At the beginning of 1989, for example, virtually the entire Washington policy community saw a big economic surge ahead. The January and February employment data that year were explosively strong. The Fed sensed it had no choice but to raise short- term interest rates. In retrospect, it is clear that policymakers managed to act at the precise moment the economy was peaking. The Fed, looking a bit awkward, was easing by June.

Today, a lot of the same policy wizards are predicting 3 percent growth for 1998 and see the United States as largely insulated from Asia. Let's hope they're right.

David M. Smick is the founder of Johnson Smick International, which advises global financial institutions, and editor/publisher of the International Economy magazine.