Ex Treasury Secretary Warns of Recession: 'It's Hard for People to Have Confidence' in Economy

Former Treasury Secretary Lawrence Summers warned on Thursday about the growing possibility of national and global recession, arguing that "it's hard for people to have confidence" as federal interest rates are already low and President Donald Trump has launched trade disputes with allies and adversaries alike.

During an interview with CNN, Summers pointed to long-term yields being less than short-term yields, the decline in the stock market, a struggling manufacturing sector and issues with economies around the world. "These are the kinds of things that tend to proceed recessions," he said, putting the odds at "just below or just above 50-50" for a recession to begin in the next year.

"It's hard for people to have confidence in the resilience of the economy," says former Treasury Secretary Lawrence Summers on the risk of a recession. "Hard because interest rates are so low that there's not much room for the Fed to cut them further." https://t.co/HHGX23caWB pic.twitter.com/D4jWbG06IP

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"It's hard for people to have confidence in the resilience of the economy," Summers, who also previously served as the director of the National Economic Council and the chief economist at the World Bank asserted. "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."

Summers continued, warning that the odds of a united international response to global recession, such as what happened back in 2008 and 2009, was unlikely. "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 world, from Asia to Europe and North America. This week, markets have shown increasing signs of weakness, seen by analysts as at least partly a response to Trump's threat of adding tariffs to the $300 billion remaining Chinese imports to the U.S. Although stocks temporarily surged with an announcement on Monday that some of the tariffs would be postponed or suspended entirely for the Christmas season, they dipped again on Wednesday.

Stock Market
A board displays the closing numbers on the floor of the New York Stock Exchange (NYSE) on August 14 in New York City. Following news of an economic slowdown in both Germany and China, concerns over a recession in America have sent stocks plummeting with the Dow down over 800 points Spencer Platt/Saul Loeb/Getty

"Economic data have softened and are increasingly sending recession signals, particularly from the industrial side," Michelle Meyer, head of U.S. economics at Bank of America Merrill Lynch told The New York Times. "Trade is a huge part of it," she added.

Elise Jordan, a former aide in the George W. Bush White House, argued that an economic recession would be a major blow to Trump's re-election chances.

"It's political suicide," Jordan said Thursday on MSNBC's Morning Joe. "I mean, Donald Trump's political strength is premised on the idea that he has maintained and protected and cultivated a strong economy."