Leading U.S. economist: “The situation is very bad and getting worse”

Filed under: Forecasts, Bad news, Economic data, Housing, Recession

Reuters reports that one of the U.S.’s leading economists, Harvard’s Martin Feldstein gave a speech in Florida today in which he said that the U.S. faces a recession that could be “significantly more severe” than recent ones.

This is very bad news because Feldstein is the head of the National Bureau of Economic Research (NBER) which is responsible for determining when recessions begin and end. Not only that, but he is a Republican whose editorials are frequently in the Wall Street Journal. So for Feldstein to make this claim, he must have very compelling and irrefutable evidence on which to base his prediction. Given his position in the firmament of economists, It would be incredibly irresponsible for him to be exaggerating for effect.

Here are some of the scare quotes:

• “The situation is very bad, the situation is getting worse, and the risks are that it could get very bad.”
• “There’s no doubt that this year and next year are going to be very difficult years.”

• “The housing situation is getting worse by the day.”
• “There is a lack of confidence leading to a lack of liquidity … without credit creation, we can’t have economic growth.”
• “While inflation expectations are still relatively well contained, “you wonder how long that’s going to last.”

Although I have been posting along these lines for a while, I really don’t have much to add. Because when these comments come from the mouth of Martin Feldstein, they must be all too real.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

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This entry was posted on Tuesday, March 25th, 2008 at 2:11 pm and is filed under Real Estate and Housing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.