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LIANE HANSEN, host:

Nariman Behravesh is chief economist and executive vice president of the forecasting firm Global Insight, and he's on the line. Welcome to the program.

Mr. NARIMAN BEHRAVESH (Chief Economist, Executive Vice President, Global Insight): Thank you.

HANSEN: What do you think Congress can reasonably expect to accomplish given the economic picture and what you just heard from Frank Langfitt?

Mr. BEHRAVESH: Well, there are two problems. One is to make sure that he crisis doesn't get worse, and the second - which I think there are some of these proposals being discussed - is that we don't have another crisis a few years from now, so there are two different challenges. I think Congress will move fairly quickly on the crisis situation but it may take a while for them to put in longer term fixes.

HANSEN: So, crisis situation, something for mortgage holders perhaps?

Mr. BEHRAVESH: Very much so. I think, for example, the proposals being suggested by Congressman Barney Frank and Senator Christopher Dodd are in that category of helping out borrowers basically.

HANSEN: Consumer confidence is at a 16-year low, according to Bloomberg News. Does that change consumer behavior to hear that number?

Mr. BEHRAVESH: Oh, very much so. Consumers have been hit with a double whammy as it were. First is, of course, the housing crunch and subprime crisis has tightened credit for a lot of consumers. But the other, of course, is the oil price situation, high oil prices, high gasoline prices have set a huge squeeze on consumer budgets.

Our best guess is that after having grown about three percent a year for the last three years, consumer spending in the first half of this year will be essentially flat. So, consumers are hurting and they're behaving accordingly as it were.

HANSEN: And their behavior, what does that mean for the economy?

Mr. BEHRAVESH: Well, I think our view is that the economy will go through a recession in the first half. Probably a short and fairly shallow one, but a recession nevertheless.

HANSEN: How do you tell whether dramatic moves by the federal government, like slashing rates or that unprecedented lending, for example, to investment banks, how do you tell whether they're working?

Mr. BEHRAVESH: Well, there are a number of indicators. One, of course, is the stock market. The stock market seems to have bounced back. There are other indicators where you look at interest rate spreads between very safe assets and riskier assets. And for a while they just jumped quite dramatically. Now they've come down suggesting that markets are a lot calmer. They seem to be less worried about the potential for a true sort of financial meltdown, financial panic. So it looks like it is working and it is helping to calm the markets down.

HANSEN: But we seem to go through periods of calm and panic, calm and panic.

Mr. BEHRAVESH: You're absolutely right about that. And I think that the big worry is is there another Bear Stearns out there that come back. But I think they've been through this before so that they can probably get on top of it. It's not just the Fed, but some of the other regulatory agencies. So frankly I'm a little less worried about the next one if it were to happen.

HANSEN: Looking broadly, do you think that there is something fundamentally wrong with the U.S. economy? An example might be an addiction to easy money, cheap credit?

Mr. BEHRAVESH: I think we certainly overdid it in this housing crunch - well boom and then subsequent and crunch - but I think this is an economy that's quite resilient. We've been through similar kinds of things in the past. You know, 20 years ago we had the savings and loan crisis, which brought down house prices quite dramatically in a number of regions. And we bounced back eventually from that.

So I think it's in the nature of a capitalist economy sort of go through some of these kinds of booms and busts. But the good news is, in the U.S. at least, the resilience has not turned these crises into true deep recessions or, God forbid, a depression.

HANSEN: So we just keep calling it a correction?

Mr. BEHRAVESH: Well, I think it's more of a correction this time. I think this is certainly, from a housing perspective, this is the worst housing crash crunch, you name it, in the post-war period. So, this is a little more serious than before. But the good news is, for example, that the service sectors of the economy, the exporting sectors of the economy, have not been hurt that badly. So this is a well-diversified economy with a fair amount of resilience.

HANSEN: Nariman Behravesh is chief economist and executive vice president of Global Insight in Waltham, Massachusetts. Thank you.

Mr. BEHRAVESH: Thank you.

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