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Lawrence Summers: Odds Favor U.S. Recession

For business strategists and business owners trying to handicap the chance of a recession in the U.S., news earlier this week has been encouraging. Triple-digit stock market gains, dropping oil prices, decent Black Friday sales, and and hints of another interest rate cut by the Fed has somewhat lightened the gloom-and-doom mood, at least on Wall Street.

But the cautious business leader can't afford to look through rose colored glasses. A op-ed in the Financial Times this week by Lawrence Summers all but predicts a recession even if policy makers wake up and start pulling the levers of economic control. The piece, titled "Wake Up to the Dangers of a Deepening Crisis", should give pause to anyone making a living off of consumer spending.

Summers, the past president of Harvard University, now teaches at Harvard's Kennedy School of Government. He has served as political economist for the President's Council of Economic Advisers, chief economist of the World Bank, and secretary of the treasury of the United States. In other words, he has some insight into current economic conditions, and what he sees are trends heading in the wrong direction.

Says Summers: "Even if necessary changes in policy are implemented, the odds now favor a U.S. recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond. "

Feeling a little more uncertain about the immediate economic future? Read our post on preparing for recession/economic uncertainty.

Sean Silverthorne

Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.

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