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January 3, 2001

SMU ECONOMICS PROFESSOR PREDICTED MARKET TURMOIL IN HIS 1999 BOOK

DALLAS (SMU) -- Southern Methodist University Economics Professor Ravi Batra, whose best-selling books predicted the 1987 stock market crash and the collapse of Soviet communism, says this week's market turmoil was foretold in his latest book, The Crash of the Millennium: Surviving the Coming Inflationary Depression, (1999, Random House, Harmony Books). Batra is available for media interviews by calling 214-750-9582 or 214-768-2707.

In The Crash of the Millennium: Surviving the Coming Inflationary Depression, Batra wrote that U.S. financial markets would start to unravel by mid-2000 and then crash in the new millennium, with much of the damage occurring in 2000 and 2001. With the NASDAQ index crashing in April 2000 and then again at the end of the year, Batra says one of the major pillars of American asset markets and wealth has collapsed. The pace of the collapse accelerated on the first trading day of the new year when the NASDAQ index sank another 7 percent, but Batra says made a predictable comeback the next day as the Federal Reserve Bank, in a panic move, cut the interest rate by one-half percent.

"Unfortunately, the pain to the investor has just begun," Batra said. "The dot.com crash is merely a sad premonition of coming events, and the interest rate cut, anticipated in my book, will give a very temporary reprieve to financial markets. This is a bad move because now the Fed has little left to counter the impact of unfavorable economic news. More pain will follow soon after the presidential inauguration of George W. Bush on Jan. 20. Call it the exploding imbalance between production and consumption, the apex of bursting speculative bubbles, the wrath of a blistering winter or just the revenge of the gods against Bush's election machinations. Call it what you will, the real pain in U.S. financial markets is yet to come. The Dow itself is likely to crash soon after Jan. 20."

The SMU economics professor says the premise of his book is as simple and powerful as the law of supply and demand. Batra believes wages are the main source of demand and productivity the main source of supply. When wages lag behind productivity for any reason, demand trails supply, so that debt must be created to maintain a balance between production and consumption.

"A day comes when the debt is so large that it cannot rise any more then demand trails supply, and the over-inflated financial markets crash one by one," he said. "Hence economic policy should aim at preserving a balance between real wages and productivity. When the speculative bubble bursts, the country faces a deflationary recession or depression if its trade is in balance or in surplus. But if it has a trade deficit, then its currency collapses and the end result is an inflationary recession or depression. With the trade deficit mushrooming in the United States for more than two decades, I foresee a collapse of the dollar and an inflationary depression in America unfolding in the next two years. Even now perhaps this sounds like a fantastic forecast, but all my forecasts have sounded fantastic at the time they were made," Batra said.

The Crash of the Millennium describes how individuals, businesses and governments can prepare for the hardships that lie ahead. The good news, according to Batra, is that in the long term, the world is evolving toward the first global golden age.

Batra is the author of several best-selling books in the U.S. and abroad. From 1977 to 1980, he was chair of the SMU Department of Economics in Dedman College. Batra was ranked third among 46 "superstars" selected from all-American universities by the journal Economic Inquiry. In 1990, the prime minister of Italy awarded him a Medal of the Italian Senate for correctly predicting the downfall of Soviet communism, 15 years before it occurred.

Batra says he successfully predicted the stock market crash of 1987, the fall 1998 U.S. stock market slump, the market turmoil in Asia and Latin America, the collapse of Soviet communism and the 1979 revolution in Iran. In his number one best-selling book, The Great Depression of 1990, published in 1985, Batra predicted a depression for the U.S. and Japan. While the U.S. suffered only a recession in 1990, Japan did experience a crippling stock market crash and mounting economic troubles all through the 1990s.

 


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