On Thursday, Lawrence Summers’ words rang alarm bells as he argued that “it's hard for people to have confidence" in the economy amid plunging fede
On Thursday, Lawrence Summers’ words rang alarm bells as he argued that “it’s hard for people to have confidence” in the economy amid plunging federal interest rates and US trade wars. In an interview with CNN, Mr Summers reeled off several red flags that pointed towards an imminent recession. He referred to long-term yields being less than short-term yields, the steep decline in the stock market, a struggling manufacturing sector as well as issues with economies around the world. He said: “These are the kinds of things that tend to proceed recessions putting the odds at just below or just above 50-50″ for a recession to commence in the next year.”
Mr Summers, who previously served as the director of the National Economic Council and the chief economist at the World Bank sympathised with the public and said: “It’s hard for people to have confidence in the resilience of the economy.
“Hard because interest rates are so low, there’s not much room for the Federal Reserve to cut them further.
“Hard because we already fired the fiscal cannon on a misguided tax cut targeted to the highest income people who least need the money.
“And hard, frankly, because of doubts about the competence of the economic team in place.”
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Citing the catastrophic 2008 financial crash and consequent global recession, Mr Summers said there would not be such a warm and united international response.
He said: “Today we’ve got a United States who’s at economic war with most of the rest of the world, feuding with Europe, feuding with North America and certainly feuding with China.”
Experts have warned of global recession in countries around the globe, from Asia to Europe and North America.
Only this week markets have shown increasing signs of weakness, with Trump’s threat of adding tariffs to the $300billion remaining Chinese imports to the US partly to blame.
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The fears were momentarily dispelled after an announcement on Monday that some tariffs would be postponed or suspended entirely for the Christmas season.
However. prolonged tensions with China among other fiscal failures saw stocks dip again on Wednesday.
Elise Jordan, a former aide in the George W. Bush White House, argued that an economic recession would act as a major blow to Mr Trump’s re-election chances.
She told MSNBC’s Morning Joe programme: “It’s political suicide, Donald Trump’s political strength is premised on the idea that he has maintained and protected and cultivated a strong economy.”