Tags: larry summers | recession | central banks | economy

Larry Summers: Global Central Banks Lack Firepower to Fight Next Recession

Image: Larry Summers: Global Central Banks Lack Firepower to Fight Next Recession

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By    |   Wednesday, 12 Oct 2016 01:11 PM

 

Former Treasury Secretary Larry Summers warns that global central banks are totally unprepared to fight the next recession.

He explained to CNBC recently that interest rates commonly drop 500 basis points to contain a recession, and according to market pricing, there's not going to be 500 basis points of room anytime soon.

 

"Probably sometime in the foreseeable future we'll have a recession in some major part of the world. And yet we don't really have the fuel in the tank to respond," said Summers.

"That's got to be a matter of serious concern … in terms of monetary policy frameworks, a matter of serious concern requiring more use of fiscal policies than we've seen so far."

Summers, now a Harvard professor, isn't the only respected financial guru to sound the alarm about a looming economic downturn.
 

Bank of America Merrill Lynch recently warned that the United States shows “evidence for an imminent recession.”


"While the range of signals is wide, in aggregate they do suggest that, if data were to continue to weaken in line with the recent pace, history would point to a recession in the second half of 2017," wrote Savita Subramanian, head of U.S. equity and quantitative strategy. "But in examining some of some of our favorite indicators' recent trends, we did find evidence for an imminent recession," she wrote.

She "looked at five main macro factors to determine what they are saying about a recession: the two-year Treasury yield vs. the 10-year yield, the ISM manufacturing index, building permits, temporary-help job growth, and commercial and industrial loan growth," Business Insider wrote.

 

"By looking at what each of these indicators did before previous recessions over the life of the indicator, Subramanian came up with an estimate of where we are in the business cycle," BI reported.

"In this scenario, the range of potential recession start dates implied by these models was as early as July 2016 and as far off as April 2019, with an average start date of October 2017," Subramanian wrote.

(Newsmax wire services contributed to this report).

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Former Treasury Secretary Larry Summers warns that global central banks are totally unprepared to fight the next recession.
larry summers, recession, central banks, economy
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2016-11-12
Wednesday, 12 Oct 2016 01:11 PM
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