Rim Of Recession: Despite Tax Cut And Fed Easing, Economy Slumps.(ISSUES & INSIGHTS)(BRAIN TRUST)

Byline: Paul Craig Roberts

The economy appears to be entering the second leg of a serious downturn, much to the discomfort of the Bush administration and money managers. Both have been expecting the economy and stocks to move ahead in response to aggressive Fed easing and the tax cut.

Instead, business sales are falling faster than inventories. Consumers, strung out on debt, are beginning to feel uncomfortable with home equity loans and are likely to raise their saving rate.

The dollar is coming under pressure from poor equity market performance. It is also coming under pressure from new reporting requirements on dollar accounts held by foreigners and by a decline in the dollar's share of …