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3 Views on Recession

·2 min read
REUTERS/Jonathan Ernst

"There are many reasons why we are going to have a severe recession and a severe debt and financial crisis. … The idea that this is going to be short and shallow is totally delusional.”

— Economist Nouriel Roubini, who predicted the housing crash 15 years ago and is known as “Dr. Doom,” in an interview Monday with Bloomberg. In making his call for a more severe downturn, Roubini cited historically high debt ratios for advanced economies and tightening monetary policy. “We have no fiscal space,” Roubini said.

“I think there is a very high likelihood of recession. When we’ve been in this kind of situation before, recession has essentially always followed. When inflation has been high and unemployment has been low, soft landings represent a kind of triumph of hope over experience. I think we’re very unlikely to see one.”

— Former Treasury Secretary Larry Summers, speaking to CNN’s Fareed Zakaria Sunday. Summers also said that there is a significant risk that the Fed will fail to control inflation, even with an economic slowdown. “Whether or not we put inflation fully back in the bottle with that recession, I think is very hard to judge at this point. … I think there is also a greater risk of stagflation and this episode being with us for some number of years than the market is currently discounting.”

“I would be amazed if the NBER would declare this period to be a recession, even if it happens to have two quarters of negative growth. We’ve got a very strong labor market. When you’re creating almost 400,000 jobs a month, that is not a recession.”

— Treasury Secretary Janet Yellen, appearing on NBC's "Meet the Press" Sunday. “A common definition of recession is two negative quarters of GDP growth,” Yellen explained. “And many economists expect second quarter GDP to be negative. … But I do want to emphasize: What a recession really means is a broad-based contraction in the economy. And even if that number is negative, we are not in a recession now. And I would, you know, warn that we should be not, not characterizing that as a recession.”

At the same time, Yellen acknowledged that there are worrisome signs on the horizon. “Growth is slowing globally,” she said. “And I'm not saying that we will definitely avoid a recession, but I think there is a path that keeps the labor market strong and brings inflation down.”

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