During a portion of an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” economist, Harvard Professor, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers stated that he doesn’t see how anyone “can look at either the historical experience or what markets are predicting and not think that it’s 50-50, better than 50-50, that a recession will start some time within the next two years.” Summers said that while he pays attention to the yield curve, “I pay a little less attention to it than people in the markets do. And I think it’s important to understand that it’s not a causal relationship, if it exists, it’s a canary in the coal mine kind of relationship. So, it’s not that changing the ten-year interest rate, if you could do it in some way, will change the prospect of recession. Rather, it’s that when people are forecasting that the Fed is going to be cutting rates, they’re also forecasting that that’s going to happen because there’s a recession. So, it’s a correlation thing, not a causation thing.” He continued, “I think that what’s happening with the yield curve adds to a sense of economic anxiety that, in situations like this, historically, we have not achieved soft landings, and we have seen recessions. Is it a certainty that we’ll see a recession in the next two to three years? No. Is it more likely than not that we will see a recession in the next two years? I don’t see how anybody can look at either the historical experience or what markets are predicting and not think that it’s 50-50, better than 50-50, that a recession will start some time within the next two years.” Follow Ian Hanchett on Twitter @IanHanchett.
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