Summers warns that he is probably heading towards a recession, leaving 2 million people unemployed.
Former Treasury Secretary Lawrence Summers warned that 2 million Americans are likely to be cut off work thanks to the current increase in 2 million Americans on trains.
“It’s not like we’re going to have a recession. In the context of the recession, we see another 2 million people unemployed,” Summers told Bloomberg TV. Wall Street Week With David Westin. “We’re seeing more than $5,000 per family “we see a loss in household income,” he said.
Summers, a Harvard professor and Bloomberg TV contributor, has “a very important choice in the coming weeks” when it comes to President Donald Trump’s tariff plan that goes beyond even the 1930 tariff plan that “makes depression great.” He said it is wise to “support the policy announced.”
Financial markets are “talking with incredible clarity” about the impact of tariffs, Summers said.
Follow the Big Take Daily Podcast wherever you listen.
“In the context of the recession, there is a very high chance that the market will reach a level well below the current level,” Summers said. “If there’s still a bottom in this stage and the market, I’d be surprised,” he said.
He noted that the US economic downturn will have a variety of other negative effects, including a wide budget deficit. “There is financial distress affecting high-risk businesses and high-risk countries in the global economy.”
Market “Alarm”
While it is “hard to know” about the risk of an economic recession turning into a financial crisis, the former Treasury chief emphasized tightening regulations since the 2007-2009 meltdown, when financial companies were focused on ensuring that the so-called plumbing of the system was fully utilized and that the systems were functional. Deputy Chief Michael Folkender said early Tuesday that “liquidity continues to flow,” and that despite market volatility, there was no “distance.”
“I’m not too worried about the internal integrity of the market than the external messages the market is sending. I think this is one of the alarms,” Summers said. He said that if some business executives and academic leaders weren’t talking about their concerns about policy action, the market was a “very important signal of where things are heading.”
For the first time, he noted, he is facing a recession caused by its own policy action. “There’s nothing in the outside world that is causing this challenge. It’s induced by the words and actions of President Trump and his administration,” he said. “I don’t know there is a really historical precedent for what’s going on right now.”
If the government retreats that “policy error,” the economy “has a substantial reopening of normalcy,” he said.
“B” student
“There’s nothing complicated about this,” Summers said. The uncertainty clouding of the imposition of a massive tax hike on the middle class, it is “introductory economics” that has hurt businesses and pushed the economy down, Summers said. “Everyone knows the answer to that is that raising prices and raising unemployment is a supply shock.”
When Washington returns tariff rates to pre-World War II levels, it will be “very expensive for the US and the global economy,” Summers said. “The losses to the market would be trillions of dollars if they were convinced that all of this would be implemented. And the stock market would only measure a small portion of the losses to the economy from this type of policy.”
This story was originally introduced Fortune.com