It has been a tough week of news for the economy and business. US Consumer confidence dropped to the lowest level since the crash of ’87. GE reported disappointing quarterly and projected earnings sending their shares tumbling the most since 1987. Frontier Airlines, out ofDenver, was the fourthUSairline to declare bankruptcy in the past three weeks. Last, but not least, the US Congress has set a dangerous precedent on trade by halting cooperation with the Executive Branch and holding up a pact with Columbia. If the gambit is pushed it may affect numerous other negotiations and slow global commerce at a time when theUSis heavily dependant on exports.

Search for the bottom in the housing recession continues, leading indicators are falling, the auction market has dried up, Oil breaks $100, Gold is reaching new highs, and the job market is cooling. Unfortunately there is little evidence to support the thesis that we will miss a recession other than the continued strong momentum in Asia and theMiddle Eastmay pull us out of this dive with the help of lower rates and government stimuli.

The title of last week’s Brief “It’s Not That Bad” rubbed a few of our readers the wrong way. It was insensitive at best to those in the real estate industry and I apologize.US mortgage foreclosures are set to top 1 million this year and home prices are falling at the fastest pace since the Great Depression. In the real estate industry it is that bad. While there is still mixed thought on whether it will drag the economy into recession, more industry leaders and economists are calling for dramatic government action. They say we need significant fiscal (tax cuts and relaxed mortgage rules) and monetary stimulation (further Fed rate reductions).

The economy is drifting very close to the edge now and what would have taken a gale force wind a few months ago might well be accomplished with little more than a wisp now. You might remember that in last weeks’ Brief we posed the question as to whether the Fed had lowered rates enough to sustain economic expansion. We noted that future reductions might be constrained because of growing threats of inflation as well as a dramatically sinking dollar. But without them, we noted the odds were greater that the economy would falter. The past several weeks’ revelations of worsening banking and credit problems, combined with a host of economic releases showing deterioration have changed the tone of the Fed dramatically.