It is feared that the United States is heading for a recession. This warning is from a former United States treasury secretary, Larry Summers, who served in office between 1999 and 2001.
Mr Summers believes that the risks of recession are even greater than they have been at any time since 9/11. Mr Summers warning comes after the announcement of the near breakdown of the commercial paper market, which is worth $2,200billion.
The sale of the state bank SachsenLB in Germany has done little to avert these fears, as it was sold to its rival Landesbank Baden-Wuttemberg for a token payment of $300 million. Experts are waiting to see what will happen next as they are uncertain about the extent of non-confirming loan problems which would make the situation worse.
Our view
The Federal Reserve is already taking action to stimulate the economy. It is going to be an interesting 2008. Remember the saying, “If America sneezes, the whole planet catches a cold”. Watch this space.
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