Ex-U.S. Treasury head Summers says recession likely

The odds now point to a U.S. economic recession that slows global growth significantly even if necessary policy changes are implemented, former U.S. Treasury secretary Larry Summers said.

Summers, who served in the Democratic administration of former president Bill Clinton, said the U.S. authorities needed to act urgently in avert long-lasting economic damage from the global credit crunch.

"Without stronger policy responses than have been observed to date ... there is the risk that the adverse impacts will be felt for the rest of the decade and beyond,"

http://news.yahoo.com/s/nm/20071126/bs_nm/summers_recession_dc;_ylt=AnTUh9Jb9aXQB2iDKay_Sca573QA

From Summers in the Financial Times:

Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability.

Even if necessary changes in policy are implemented, the odds now favour a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond.

Several streams of data indicate how much more serious the situation is than was clear a few months ago. First, forward-looking indicators suggest that the housing sector may be in free-fall from what felt like the basement levels of a few months ago. Single family home construction may be down over the next year by as much as half from previous peak levels. There are forecasts implied by at least one property derivatives market indicating that nationwide house prices could fall from their previous peaks by as much as 25 per cent over the next several years.

http://www.ft.com/cms/s/0/b56079a8-9b71-11dc-8aad-0000779fd2ac.html