This blog post originally appeared on RealMoney Silver on Nov. 25 at 7:59 a.m. EST.

"While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint." -- Drew Faust, Harvard University President

In "

Welcome to Dystopia

," I outlined how severely our economic and investment futures had been rocked. I concluded that there would be broad-based social, political, credit, economic and stock market ramifications from the economic and market jolts of the past 18 months. The emerging trends could produce an uncertainty of outcomes that make it difficult to glibly conclude that the market's dramatic decline has been fully discounted and almost certainly questions the market's intermediate-term upside.

In that column, I also raised a concern that the negative impact would be seen in some unlikely places, such as in our educational system.

"Our educational system faces upheaval. Expensive private institutions will face a sharp falloff in admissions, while state institutions will flourish and admissions will grow more competitive. Losses in university endowments will result in larger classrooms and layoffs in personnel." -- Doug Kass, Nov. 3, 2008

Indeed, even Harvard is

not immune

. As the value of its endowment continues to shrink, the university now looks to

tighten its belt

, and the local economic impact looms large.

Harvard's nearly $37 billion endowment, the largest of any academic institution, funds more than one-third of the university's annual $3.5 billion operating budget. Based on the carnage in the capital markets, Harvard is at risk of facing losses and is currently

reassessing

its sweeping 20-year expansion, which includes the development of 4 million to 5 million square feet, covering over 200 acres across the Charles River in Allston, Mass.

In the Ivy League, in Boston and elsewhere, Harvard is not alone. In October, Boston University instituted a hiring freeze and a moratorium on all construction projects that are not already under way, and last week, Dartmouth College said that it was trimming its budget after its endowment lost $220 million during the investment crisis. Brown and Cornell also imposed hiring freezes recently.

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The long tail and economic multiplier effect of the destruction in wealth from the stock market's drop runs well beyond Harvard University and the other educational institutions as it also extends to many charities.

Market losses by wealthy donors and the demise of some of the most generous givers on Wall Street (i.e.,

Lehman Brothers

and

Bear Stearns

) have had a material negative impact on charitable fund-raising now and will in the year(s) ahead. Even the Bill & Melinda Gates Foundation is

decreasing

the size of its grants this year. This morning,

The Wall Street Journal

examines

the stock market's profoundly negative impact on charitable contributions. One charity mentioned in the article,

Harlem Children's Zone

, to which I have contributed in the past and of which eminent hedge-hogger Stan Druckenmiller is its key supporter, was recently forced to cut 10% of its staff in the face of moderating donations.

The recession and stock market blast is even hitting the fanciest Upper East Side schools. An annual benefit auction at the Trevor Day School offering a tennis lesson from John McEnroe -- Johnny Mack's daughter is a student at the school -- drew a bid of only $8,000 vs. past bids in excess of $15,000.

The magnitude of the price drop in stocks has reached a tipping point.

In the past, stock prices have predicted an economic recession. By contrast, in recent months, the drop in stock prices has not only hastened a recession but has served to deepen the economic recession.

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Think about the economic multiplier effect of the stock market's downturn on local economies as projects are abandoned or scaled back and hundreds of charities are ultimately forced to close.

The stock market's drop will have a profoundly negative impact and a long tail of influence on the real economy.

Doug Kass writes daily for

RealMoney Silver

, a premium bundle service from TheStreet.com. For a free trial to

RealMoney Silver

and exclusive access to Mr. Kass' daily trading diary, please click here.

Know What You Own:

Some of the Harvard University endowment's top equity holdings include

iShares MSCI Emerging Markets Index

(EEM) - Get iShares MSCI Emerging Markets ETF Report

,

iShares MSCI Brazil Index

(EWZ) - Get iShares MSCI Brazil ETF Report

,

iShares MSCI South Korea Index

(EWY) - Get iShares MSCI South Korea ETF Report

,

iShares FTSE/Xinhua China 25 Index

(FXI) - Get iShares China Large-Cap ETF Report

iShares MSCI South Africa Index

(EZA) - Get iShares MSCI South Africa ETF Report

and

iShares MSCI Mexico Investable Market Index

(EWW) - Get iShares MSCI Mexico ETF Report

and

iShares Russell 2000 Index

(IWM) - Get iShares Russell 2000 ETF Report

. For more on the value of knowing what you own, visit TheStreet.com's

Investing A-to-Z

section.

At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.