‘Premature pessimism’ gives many firms an edge

WASHINGTON – Even as the nation tumbles into recession, “we still have what, at the moment at least, appears to be a reasonably good real economy, as distinct from finance,” Alan Greenspan told investors recently, according to Bloomberg News.
U.S. businesses outside the financial services industry are in far better shape than at the beginning of the past two economic contractions, having tucked away more than half a trillion dollars in cash; pared short-term debt; and cut inventories to near-record lows in relation to sales, especially in manufacturing. That is a “major advantage,” Greenspan told an April 8 investors’ conference in Tokyo, where he appeared electronically.
The former Federal Reserve chief sees the economy as a “tug-of-war” between healthy non-financial companies and the crippled credit and housing industries. His successor, Ben S. Bernanke, seems to agree. On April 2, Bernanke told lawmakers that, aside from the banking and securities industries, the nation’s corporate balance sheets are sound.
Lakshman Achuthan, managing director of the Economic Cycle Research Institute in New York, credits “premature pessimism” with helping inspire the current level of corporate preparedness: “The forecast demise of the U.S. economy has been happening now for years,” told Bloomberg News. “Ever since 2005, the `R’ word has popped up.”