Bigwigs see recession — and worse

Three big-name economists have a distinctly gloomy view of the world this morning. In the Financial Times, former Treasury Secretary Larry Summers joins the crowd predicting the United States will tumble into recession under the weight of a spreading credit crunch. He says the Fed should ease rates further to stave off a deepening credit crisis, as “levels of the Fed funds rate that were neutral when the financial system was working normally are quite contractionary today.”

In the New York Times, Yale economics professor Robert Shiller warns the housing crisis is deepening. He calls for a fundamentally new approach to staving off foreclosures and keeping Americans in their homes, including changes to bankruptcy law and a rethinking of the role of institutions such as Fannie Mae (FNM). He calls the official response to the housing bust and related credit issues “anemic.”

And not to be outdone, NYU economics professor Nouriel Roubini says on his website that the 3.5% decline in American consumers’ average Black Friday spending shows that a U.S. hard landing and global slowdown are inevitable. He even calls for a stock market crash, saying, “Once the evidence of an economic hard landing is clear even to stock market investors – it is certainly clear to bond markets and to credit markets by now – you can expect a sharp fall in stock prices, a process that has already started in financial stocks, discretionary consumer stocks, retail stocks and housing related stocks.” Nothing like starting the week off on an upbeat note.