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CNN Sunday Morning
Interview With Donald Ratajczak
Aired November 25, 2001 - 08:24 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MARTIN SAVIDGE, CNN ANCHOR: The nation's economic market finished this past week with pretty nice gains, but how will the markets react if Osama bin Laden is caught or killed?
Don Ratajczak is the former director of the Economic Forecasting Center in Atlanta.
Good morning to you. Thanks for being with us.
DONALD RATAJCZAK, ECONOMIC ANALYST: Good morning. Thanks.
SAVIDGE: All right, here's the scenario. Osama bin Laden reportedly killed. What does that do to the markets?
RATAJCZAK: Well, I mean if it's confirmed, removal of Osama, that's very positive. I mean, it's not the end, because obviously we have to take care of all the al Qaeda. But he's the head. He's the prime terrorist. He's the motivator.
So you eliminate him and you reduce your risk of terror around the country, so -- around the world. So what happens is you, to some extent, reverse that huge selloff we had when we opened the markets. You get travel coming up, you get the airlines doing a little bit better, and you get a good tone for the overall market.
SAVIDGE: Is there a difference, though, if he is captured, say, and put on trial?
RATAJCZAK: Well, of course, we always worry about what kind of reactions will there be, will there be more terrorism because he becomes a magnet for that? But I think the worst case is, he just disappears. Then he would become some kind of a wizard in people's minds, and can always be somebody that they rally around -- you know, he'll be like Elvis, being viewed everywhere.
SAVIDGE: There's always winners and losers in any sort of change in the markets. Say Osama is killed. Who loses in the financial markets as a result of that?
RATAJCZAK: Well, obviously we'll think that defense won't have to be as heavy a player and so you -- all your defense and your defense techo type of companies will slow down.
SAVIDGE: You've heard the big debate. Are we in recession, in your mind?
RATAJCZAK: Oh, there's no question. We're losing jobs; we're still losing jobs, although the numbers are starting to look more encouraging. But we're still losing probably 100,000 jobs a month.
SAVIDGE: And is this sort of a strange recession? I mean, is there anything we can sort of compare it to in the past, or not?
RATAJCZAK: Well, all recessions have a little bit of their uniqueness here. What's unusual here is that nobody ever saw an absence of credit, it was -- and therefore housing never came down. Housing held up very nicely.
Construction was very late in this recession -- typically they're always at the front end. This was a consumer-led and a capital spending-led recession. The consumer backed away and the corporations decided not to invest.
SAVIDGE: All right. So if it is somewhat unusual, how can we even begin to predict when it might end? And what do you say in that light?
RATAJCZAK: Well, there are dynamics. Regardless of what starts the recession down, you then get what's called a multiplier effect, the people who stop spending because they lose jobs. And you can trace that part of the pattern.
Obviously, if you get hit on the head again, then there's another falling down. You know, our big concern is: Will the financial people, the banks, stop lending? If they stop lending, then you get a second stage down, and you can get a quite severe recession.
The good news is the Fed was right on top of it, the banks have capacity to lend, and we shouldn't see that cascading effect.
SAVIDGE: But are we at the bottom now?
RATAJCZAK: We're not at the bottom yet, although it's getting close. And of course, we're studying all of these sales this weekend. This weekend is very important.
SAVIDGE: But what do we look for? What is that glimmer of hope that says: "Uh huh, we're turning the corner?"
RATAJCZAK: Well, what we want to see is number one, do consumers have confidence? Are they starting to spend again? Number two: Is the corporate world starting to balance out their earnings so that they can start to think about putting new investments together?
SAVIDGE: Well, we'll keep our eyes open for them. Don Ratajczak, thank you very much for coming in at this early hour. The former director of the Economic Forecasting Center in Atlanta.
RATAJCZAK: Thank you.
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