U.S.: Can The New Economy Handle This Stress Test?

In several important ways, the New Economy is behaving a lot like the older version. Despite new technologies and globalization, it still has its ups and downs. It's still subject to shifts in Federal Reserve policy. And most important for the coming months, it still must endure old-fashioned inventory corrections.

The emerging inventory adjustment was uppermost in Fed Chairman Alan Greenspan's mind during his brief but crucial comments on the economy in his Jan. 25 congressional testimony. He said bluntly to Senator Olympia J. Snowe (R-Me.) that "we are observing the beginnings of what is probably a major inventory correction." The belief is the underpinning of his remark to Senator Paul S. Sarbanes (D-Md.) that economic growth right now is "very close to zero."