Summers On Recession: "I Don't Think The Worst Is Over"

For this week's installment of their "Lunch with the FT" feature the Financial Times sat down with Larry Summers, director of Obama's National Economic Council, for a wide-ranging talk. When the conversation turned to the current recession in the U.S., Summers did not exude optimism:

Onward, then, to the toughest economic challenge Summers faces today: the recession. Here, Summers turns sombre: "I don't think the worst is over ... It's very likely that more jobs will be lost. It would not be surprising if GDP has not yet reached its low. What does appear to be true is that the sense of panic in the markets and freefall in the economy has subsided and one does not have the sense of a situation as out of control as a few months ago."

Read the rest of the interview.

Comments

[rabiddog6708]

Read this great article on why the recession may be worse than most people think (or are being told by the media:

http://finance.yahoo.com/news/Nine-Reasons-the-Economy-is-usnews-1021116601.html?x=0&.v=1

[BurtonOerney]

I remember one of the major arguments for the inclusion of aid to states, food stamp funding increases and unemployment extensions in the stimulus package was that those things had the largest multiplier effect - more than tax cuts, anyway. Financial bailouts to plug holes in balance sheets also should have large multiplier effects because that should increase lending. Lending has certainly increased since the bailouts happened but as of yet, not by enough. We want that money funding new businesses and jobs. Banks want to lend money because that makes them money. I think it's a process that's already happening and that by the end of this year, lending will be at an acceptable level. If, however, you want to find the obstacle to lending right now and remove it, that's perfectly reasonable. I don't see how firing the secretary of treasury, the chairman of the federal reserve and the director of the nec will get that done, though.

[BurtonOerney]

I've always wondered why Carter fired the five cabinet secretaries - including Blumenthal at Treasury - when he did, even through he's just given the malaise speech, which was well received and his economic policies were performing as expected. Modern democrats, especially progressives, cannot seem to operate as the ruling party and remain left of center at the same time. This need to identify and punish enemies and evil doers at the expense of stability is unreasonable but won't go away and it comes from the progressive electorate. No social policy is pure enough. No financial relief benefits the worker in a sufficiently direct way. Gradual change is ridiculed and scorned and no quarter is given to leaders who sympathize with the large fraction of the country wary of socialism.

Right after the firings, incidentally, the dollar dropped, the market convulsed and soon we were hearing about 'stagflation.' In less than a single term after Democrats capitalized on Nixon's historic collapse, taking both houses of congress and the presidency, they gave all gains back and more.

[Lilith33]

Summers needs to go...

WIKI;
Summers pressured the Korean government to raise its interest rates and balance its budget in the midst of a recession, policies criticized by Paul Krugman and Joseph Stiglitz.[7] According to the book The Chastening, by Paul Blustein, during this crisis, Summers, along with Paul Wolfowitz, pushed for regime change in Indonesia.[8]

As Treasury Secretary, Summers led the Clinton Administration's opposition to tax cuts proposed by the Republican Congress in 1999. [9] Also during his stint in the Clinton Administration, Summers was successful in pushing for capital gains tax cuts.[citation needed] During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.[10] Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets.[11]

Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass-Steagall Act): "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said.[12] "This historic legislation will better enable American companies to compete in the new economy."

[Nina28]

How could it be people, geezus it took a long time of Republican reign to do this country in and it's gonna take a long time to get us out.

Is everyone who is blaming the Obama administration a sufferer of AADD?

He said right off the bat, it's a deep hole we got in (under Bush/Cheney) it's going to take time to dig us out and there will be false starts and setbacks...What month is this?

Com'on this ain't like prepping fast foods!

[ThinkDeeper1]

Nina28, you're correct BUT until Geithner and Summers are fired and the banks "umbilical cord" of free flowing tax payer dollars and bailouts stop, the banks temporarily nationalized, and the high risk investors in these institutions made to accept their losses like the middle class has had to regarding their 401K's, pensions and equity investments, Obama is going to find out he has been led to make things worse..much worse.

Obama must stop delegating the economy to these Wall Street "plants". Otherwise, he will find out what George H. W. Bush found out too late.

"It's the economy....!..."

[Aesthete]

Regardless of partisan/political concerns, I don't believe that there exists a quick fix or "magic pill" for the current economic situation. One could cite many reasons for today's recession, but it cannot be fixed overnight. I KNOW it's not easy, but our only real solution is prayer and patience as we work our way through this, the key word here being "through." The success of the current administration will be determined by what's on the other side of "through." It will take time, though.

[johnsonc20]

What a softball interview. Zero specifics and fluff. White House access doesn't guarantee a good story, that's for sure.

[FdaLef]

Way to go out on a limb.

[mioffe]

Our Government has lawyers, bankers and politicians in time when we need, Engineers, Inventors and scientists with open mind.
We must create jobs not by stimulus, which will feed our sick economy, to make it worse, but by new Invention.
We must reevaluate science of GW, free it from mistakes Al Gore and scientists, which advise and support his wrong vision.
We must change our transportation system and design instead of heavy cars, carts with weight 20 Lb, which will move by road, on roads without intersection.
We must build new power plants, where we could use not only electricity, but also heat.
We must use wood as main source of energy for these power plants and solve all GHG from oven in water to watering forests, surrounding these power plants. IT WILL CREATE THE CHEAPEST SOURCE OF ENERGY WITH ZERO EMISSION.
These directions will create job in USA, despite any globalization.

[vippy]

Okay, I don't see any holes being plugged in order to alleviate the dire situations, jobs are still
leaving this country, companies are still migrating to cheaper labor somwhere else on the globe.
Makes me think that the 1%ers got us right where they want us, we will accept slave wages pretty soon. And congress is right in their pockets, does not affect them, the laws they pass are always
against the middle class. If you don't believe it, see the Commodities Futures Modernization Act of 2000, which caused the high utilitiy prices/gas prices, the last energy plan, the last credit card bill, etc. Need more proof? Vote them out of office but we can't even get that right, have not suffered enough yet.

[BobBeresford]

Good points. The real agenda is Internationalism, a global control society where normal social structure has been broken down...certainly the Middle class, but also National identity, morality, religion etc. It will be computerised and based around the big Banks and Corporations ( and their paid intellectuals ) that have set it up....and will be more important than elected Government.

In this society, most would have joined an effective slave/working class and be eating at authorised Food Corporations - like KFC and McDonalds.­....privat­e food growing may be illegal. There'd be a ruling caste supplying the officials and technocrats....like the Nomenklatura/Names in old USSR.
The reason for the high standardised Energy prices - we have some of that in New Zealand - is they are trying ( I believe ) to get standardised world pricing on commodities, so world trade can be easily run off central computers....in a world state. Also why they're trying to remove tariffs everywhere. So a pound of butter would cost the same in the USA or India.

It all revolves around the money/credit supply and the big Merchant banks ruling the roost have always been international. The projected world capital is Jerusalem.

[mioffe]

Dear vippy, "jobs are still leaving this country, companies are still migrating to cheaper labor somwhere else on the globe."
Yes you are right and it will be forever, because profit is the best way to any succes company.
"Vote them out of office but we can't even get that right, have not suffered enough yet."
If right now "we can't get that right", how we will do that better if "we will accept slave wages pretty soon." People with slave mentality will be the best to manipulate by any dictator, as we saw and see in history many times.
Only new invention could save middle class in USA, and some of them I offer. These directions will bring new jobs for scientist, engineers and workers. All these jobs will stay forever in USA.

[Harrier]

I completely agree the worst is yet to come. I don't see employment ever getting better, I see no plan improve employment as the money goes into the pockets of the rich only. They just put ever greater burdens on the states and middle class. It appears the middle class is or has collapsed . My father has two master degree and my mother one masters. My dad has been out of a job for two years. My mother, three months and I still have mine.. But my guess is in about 3 months I will lost my job. There are no jobs where I live. I applying for jobs overseas to try to save my parents house.

[Chaimirija]

what are the degrees in?

[HelloFunnyWorld]

This photograph of Summers accompanying this article - He seems to have a face one cannot Trust, it gave us the creeps, so why was he put in such an important position?? What makes, made him Worthy??

[BurtonOerney]

Certainly not his face! We need to find somebody with a kindly face - maybe with one of those gray, collegial beards. Or a really hot canadian chick.

[HelloFunnyWorld]

:) LoL

[Name Not In Use]

Summers On Recession: "I Don't Think The Worst Is Over"

Housing Price Reductions Are Proliferating

Recession Creating Legions Of Newly Homeless

Americans Swap Homes For Hotels As Recession...

GOLDMAN SACHS EXPECTED TO REPORT 'BLOWOUT' PROFITS!

Time to roll out the Guillotines ....

[confidance government]

I seriously need to set up shop in Washington selling pitchforks and torches.

[BobBeresford]

Summers On Recession: "I Don't Think The Worst Is Over"

What an understatement. Without a big change in plans, called by Barack Obama - and sacking/ignoring some of his staff ( especially Geithner ) America is going down......and this year. The sructural damage has been set up. America will be "Land of the homeless ."
The shock waves will be terrible, taking much of the world further into crisis.

Remember Thomas Jefferson.

[Solja]

and the sky is falling...

[vippy]

Actually, it is, ask those who lost their homes and now are living in tent cities or do you have your eyes closed. More are to join, sadly.

[cozen]

Does anyone in WH really understand economics?

[themodernleader]

The National Economic Council is misnamed. Larry Summers and the other dismal team players have assumed that it was the National Finance Council from before the Administration ever came into existence. Summers, Bernacke, Geithner et al represent the financial interests. They have no thought or concern for the American economic interests. Has Summers breathed a word about any assistance for American technology and manufacturing except to call for more money to graduate yet more pseudo intellectuals from stagnating American liberal arts colleges and certificated programs? Has any action of significant expenditures contributed anything to reemploy the millions of unemployed Americans? Has there been a word of public discussion of alternative strategies for expanding any portion of our economy except to make whole the bloated and corrupt banking and insurance interests?
It is obvious to this observer that the Obama Administration is a failed government until the President turns to a new wiser economic staff and radically new policies to save our economy and ourselves from subversion, exploitation and foreign domination.

[Solja]

Americans DO need more education because the traditional jobs have all been shipped overseas. We need to re-train our workforce to do other things, and this training is to be offered in our community colleges, which already exist.

I was just looking at some programs at our local community college yesterday, and there are many apprenticeship programs to learn a new trade. People who work in factories need jobs but don't have the skills. These people from the manufacturing sector will get their new training at their local community college, and a lot of that training won't be so expensive that they can't pay for it.