Shortfall

Glum economic prognostications abound, but when New York Stock Exchange Chairman James J. Needham spoke before the Economic Club of Detroit last week, his predictions were gargantuan as well as dire. Using figures based on an N.Y.S.E. study, Needham estimated that U.S. capital demands through 1985 will amount to a cumulative total of $4.7 trillion. During the same period, he argued, the economy's savings potential will only amount to a bit more than $4 trillion. The probable result: a capital shortfall of $650 billion. That figure, says Needham, "represents the projected gap between the domestic supply of investment capital expected to be available between 1974 and 1985, and the amount of investment capital that, in the absence of a gift from heaven, will be needed to meet our national economic requirements."

How does $650 billion translate into the staff and stuff of American life? Needham points out that such a sum is enough to buy two new cars for every American family, or provide new housing for the entire populations of the twelve largest U.S. cities, or feed every person in the U.S. for 2 1/2 years. Needham makes it clear, of course, that the gap will never really show up, but will instead take the form of soaring interest rates, burgeoning unemployment and rampant inflation. The actuality is hardly consoling. Nor are current market conditions. The Dow Jones industrial average of stocks plummeted 51 points for the week, to a close of 621--the market's lowest point since November 1962. At that level, the collapse has wiped out 15 years of investment gains, and the average is no higher than it was in early 1959.

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