Economist Larry Summers argues in the FT today that the odds now favor a 2008 recession in the U.S. Further, he argues that without “stronger policy responses” than have been seen by now, the impact will be felt “for the rest of this decade and beyond”.
In such an environment, economic policy needs to be governed by the clear and public recognition that restoring the normal functioning of the financial system and containing any damage its breakdown may do the real economy is the central macro-economic and financial challenge facing the US. In the US today, as in many other countries in the past, confidence will return the first day an official statement about the economy proves to have been too pessimistic.
Read the whole piece. While there is little new factually, per se, it is a cogent statement of the severity of the U.S. economic situation from someone who has sat at the policy levers.