Two Moscow businessmen, a pessimist, the other an optimist, were discussing the deteriorating economic situation in Russia. The pessimist said things could not get any worse. The optimist said, "Yes, they can."

In this sense, consider, if you will, the following "optimistic" scenario. It is scary but worthy of consideration, if for no reason other than to prepare a personal defensive strategy. Especially so, if like me, you too are apprehensive of today’s historically excessive debt :

The overvalued internet bubble will burst causing significant corrections even in blue chips. Recent excessive speculation could result in the worst and longest lasting recession since World War II because of too much uncontrolled debt. The answer is not "IF and WHEN" but, how severe the recession will be. Despite all the hype about the sustained momentum of the good times, there are primary signs of problems ahead. Following are the danger signals and steps to consider to minimize personal risk.

The next recession should come sooner rather than later — if not this year, then in 2000 or 2001. A simple review of past stock market corrections and their effect on the economy indicates the 1929 decimation of stock values was not the primary cause of the Great Depression. The fundamental cause was the major contraction of the money supply in 1930 due to excessive consumer instalment and margin loans and heavy corporate lending in the 1920s. Margin calls and bad debts triggered the collapse of the banking system.

As we approach the millennium, credit is again overextended big time. Much more so than in the 1920s. Our national trade deficit, continues to increase precipitously. A country that buys more than it sells must borrow. There are signs that the U.S. may soon run into difficulty borrowing via sale of Treasury notes and bonds to investors from the usual sources abroad. If investors from Japan and England withdraw money from their investments in Treasury paper, scarcer capital will quite likely result in higher interest rates further continuing the cycle of declining corporate profits and a weaker stock market. All of this affects investment and consumer confidence. Consumer credit is currently far more extended than in the 1920s, savings are at an all time low and there is geometrically greater public exposure to the stock market. Many investors have taken out home equity and margin loans to finance stock market speculations. Credit card debt and personal bankrupcies have reached crisis proportions. One of these days, debts must be repaid. If day traders and other speculators lose their shirts, they will clearly spend less. Over production and higher inventories will chase fewer buyers resulting in deflated prices and the beginning of employment cutbacks etc., all of which augurs the beginning of a recession cycle.

What to do? First, reduce exposure to the Wall Street casino of day trading and speculation. Second, lighten up! Take a major portion of your gains "off the table." Again, the above scenario is bleak and few economists have had the determination to be pessimistic about the roaring economy despite increasingly obvious danger signals. The good news is there is still time to lighten up and be in a position, with enough cash, to make great buys when potatoes, tomatoes and stocks are cheaper and more realistically priced.