Leaders prepare for slowing economy

The slowing U.S. economy and risk of a recession have world leaders at the edge of their seats. The United States' $8.2 trillion economy is the major engine fueling many other countries' strong growth, including progress in Mexico, Japan and Southeast Asia.\nFederal Reserve Chairman Alan Greenspan is attempting to end such worries. Greenspan unexpectedly lowered short-term interest rates Wednesday. Although this is usually seen as a positive sign, some interpret it as an ominous harbinger of things to come. A lowering of rates means people can borrow money at cheaper rates, and is usually expected to stimulate spending because loans cost less.\nRobert Wayman, CFO of Hewlett-Packard, told The Wall Street Journal he views the rate cut as a "positive sign" but said it isn't enough to allay his worries of a recession.\nOthers view the unanticipated action as a sign Greenspan saw troubling information, and he lowered rates in an attempt to stave off negative effects of the slowing economy. According to The Economist, a British weekly, the abrupt move is worrying because the last time the Fed took such action was in 1998, when Russia defaulted on its debt and Long Term Capital Management collapsed. President Bill Clinton described its collapse as "the worst (crisis) for 50 years."\nThe slowing economy poses a significant risk to the world because the United States is a major importer. The most notable example is Mexico, which sends more than 84 percent of its exports north of the Rio Grande to the United States. Without the United States, there are not enough countries to buy the exports.\nJapan, which recently warned for a third time in a decade that its economy might fall into another recession, is also vulnerable to a U.S. slowdown. It is counting on U.S. consumers' demand for Japanese products to pull it out of its economic doldrums. If Japan skids again, many expect its woes to spread like a contagion around Asia. \n"Japan is probably the most fragile country in Asia right now, and the one where a recession could create the most problems elsewhere," former Clinton economic advisor Daniel Tarullo told The New York Times.\nOther Asian countries, such as Thailand, Taiwan and South Korea, rely on the United States to buy their electronics components. As companies cut back on capital spending and consumers' demand for computers continues to slow, these countries face a serious risk of producing products nobody wants.\nThe interest rate cut, although troubling to some, is expected to increase the supply of capital because borrowers pay less for money, increasing their incentive to take advantage of this. But what many believe to be more important is some sort of stimulus to increase consumers' demand.\nIn a meeting between President-elect George W. Bush and business executives, discussion arose as to how a tax cut could stimulate demand. Phil Condit, Chairman and CEO of Boeing Co., told The New York Times the rate cut should help, but more is needed. He said tax cuts are necessary to "put the economy back on track"