Martin Feldstein: U.S. Slipping Into Recession

Martin Feldstein, chief of National Bureau of Economic Research, stated that the U.S. economy likely peaked in December or January, and is now slipping into a recession:

"I think we’re heading for a recession," said at the Reuters Investment Outlook Summit in New York. He stressed that he was speaking from his personal opinion, not that of the NBER, the unofficial arbiter of U.S. recessions."My sense is that the risk to overall GDP growth over the next six months is still very significant," he added.

The Cambridge, Massachusetts-based NBER has not declared a recession and is unlikely to do so for many months. Feldstein, who is also an economics professor at Harvard University in Cambridge, will step down from his NBER post at the end of the month."

Feldstein also noted that the current downturn was different from the norm because it was triggered by the housing slump rather than tightening of U.S. interest rates. "We have fundamental uncertainty about what is going to happen with house prices," Feldstein said. He also stated  it was conceivable the United States could go through
several years of higher-than-normal inflation along with subpar growth,
creating a mild form of the stagflation that plagued the country in the
late 1970s.

Considering that Feldstein is retiring, he is tipping his hand on the NBER call.


Jimmy P., are you going to make me wait for my BladerRunner discs, or are you going to throw in the towel and admit its all over?


Wanna Bet ?

Byron Wien Says U.S. Stocks Fail to Reflect Recession

NBER chief: U.S. slipping into recession, U.S. economy peaked in Dec/Jan
Emily Kaiser and Ros Krasny
Reuters, June 10, 2008

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  1. John commented on Jun 11

    I don’t agree with Feldstein’s politics but he’s fairly objective. For a start he called Supply Side for what a load of baloney it is. Basically I think he’s right. A period of sharp inflation with little growth.

  2. Jim Haygood commented on Jun 11

    “Feldstein … will step down from his NBER post at the end of the month.”

    Uh huh. And Ike warned us about the military-industrial complex as he stepped down from the presidency. Funny how guys who are retiring suddenly become diasrmingly candid … when they no longer have anything to lose.

    “Feldstein also noted that the current downturn was different from the norm because it was triggered by the housing slump rather than tightening of U.S. interest rates.”

    HUH? EXCUSE ME? Did we not have an unprecedented seventeen (17) rate hikes, from 1.00% to 5.25%, over a period of about two years? In both percentage increase (more than fivefold) and rate of change, this was one of the most massive tightening programs in the Fed’s history. And Feldstein writes it off as irrelevant?

    Sorry, I don’t agree. And I don’t trust him, or his colleagues, to date the recession either.

    If you want it done right, do it yourself. ;-)

  3. AGG commented on Jun 11

    “The crisis that looms for the US is the loss of world currency role. Once the dollar loses that role, the US government will not be able to finance its operations by borrowing abroad, and foreigners will cease to finance the massive US trade deficit. This crisis will eliminate the US as a world power.”

    Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at:

    This man gets it. He is pre-Jonathan Livingston Seagull, you can if you think you can, power of positive thinking, fake it till you make it attiitude. Reality isn’t negative agitprop. Reality just IS. These perception management pukes need to go away.

  4. Donny commented on Jun 11

    Hy prm-dts tht frqnt ths vn … y knw wh y r! Hr’s wht sd lst Jly.

    <>Mny f s r nt s bthrd by th rcnt drp n th mrkts, s mch s w r wth th ndrlnng fndmntls tht spprt th cnmy. T gnr th strm tht s brwng n th crdt & hsng mrkts s jst flsh. Wht’s hppnng nw n th mrkt s smply drvtv f wht s bcmng mr bvs n th cnmy ch dy. n thr wrds, mny f s “nvstrs” blv th smk tht nc gv s cvr t prtcpt n th lng sd f ths bbbl cnmy, s blwng wy … nd th wnd s gttng strngr ch wk. Dnny | Jl 27, 2007 2:26:12 PM

    Dd ny f y f**rs lstn t m thn, r r y knw fngrlss, d-blld, nd 1 stp frm bnkrptcy?

    BR: Disemvowelled for being so obnoxious:

  5. Josh commented on Jun 11

    I for one would like to know if Mr. Luskin has considered covering his shorts of FusionIQ.

  6. Dismal Deacon commented on Jun 11

    Signed our two youngest kids to go to a church camp last night. Camp Asst. Director commented that she had had several parents reverse their plans due to a recent job loss.

    Stuff like this confirms to me what the data shows. A recession looks unavoidable.


  7. Jeff commented on Jun 11

    “We gotta preserve our Goldilocks economy!!!” Yeah, right Larry…..

    What’s the story now?

  8. JohnnyVee commented on Jun 11

    The economy peaked in December or January? PEAKED? That’s when it was clear to all that we were in serious trouble. Wasn’t Cramer begging for a rate cut? Weren’t Xmas retail sales terrible? There is something disengenuous about not remembering the not so distant past.

  9. Jim Haygood commented on Jun 11

    JohnnyVee — the S&P index is one of the leading indicators. In a classic business cycle, stocks ought to peak and turn down before the real economy. This may be one reason for Feldstein saying the economy peaked in Dec. 2007 or Jan. 2008, after the S&P topped out in Oct. 2007 — it’s a very orthodox approach. And it makes the NBER look less tardy in twigging to what was happening.

    But if you think, as I do, that the cracks started much earlier — maybe as early as mid-2006 when the Housing Bubble parabola began its re-entry — then we’ve got another anomaly on our hands. Why did the S&P rally to yet another marginal record in October 2007, even after the first subprime crisis erupted with a bang in August 2007? Maybe Ben’s emergency liquidity measures can explain it. But the Oct. 2007 peak was still incredibly late, considering all the straws already in the wind from weakening housing, weakening auto sales, rising inflation, an emerging credit crunch, etc. etc. In an “orthodox” cycle, the Feb. 2007 “Shanghai break” should have been the end of the party.

    Somehow stocks are not performing the forecasting function that they used to. I’m not necessarily alleging “managing” by the authorities. But it’s hard to think of better explanations.

  10. 12th Percentile commented on Jun 11

    We have fundamental uncertainty about what is going to happen with house prices

    Who is this “we” you speak of and what seems to be the confusion? Are some of the “we” saying prices are going to go up?

    Anyone who has uncertainty about what is going to happen with house prices deserves to lose money.

  11. Krusty the Klown commented on Jun 11

    Why is the economy always “slipping” into recession? We need a few new verbs: “Economy Boogies Into Recession”..”Economy Explodes into Recession”…”Economy Slams Door on Past, Marches Bravely into Recession”…”Economy Closes Eyes, Taps Slippers Together, Wakes up in Recession.”

    And the fetish for “officially declaring” a recession makes as much sense as debating whether Darfur is or or is not a “genocide.” Doesn’t much matter to the humans on the ground.

    Makes me wonder when the term “World War II” was first used. Was it during the war itself? Is there an organization that “officially” declares world wars? Why can’t recessions (or world wars?) have names like hurricanes: “Recession Margo” or “Recession Glinda” would be easier to remember than the dates….

  12. VJ commented on Jun 11

    Martin Feldstein: U.S. Slipping Into Recession

    Slippin’ into a Recession
    Take my mind beyond the dreams
    Slippin’ into a Recession
    Take my mind beyond the dreams

    Where I talk to my brother,
    Who never said their name

    Slippin’ into a Recession
    When I heard my mother say
    Slippin’ into a Recession
    When I heard my mother say

    Slippin’ into a Recession,
    Pretty soon you’re gonna pay

  13. AGG commented on Jun 11

    St. Augustine wrote the book titled The City of God around 400 A.D.
    Here’s a quote that applies to us:
    Without justice, what are kingdoms but great robber bands? What are robber bands but small kingdoms? The band is itself made up of men, is ruled by the command of a leader, and is held together by a social pact. Plunder is divided in accordance with an agreed upon law. If this evil increases by the inclusion of dissolute men to the extent that it takes over territory, establishes headquarters, occupies cities, and subdues peoples, it publicly assumes the title of kingdom!

    A fitting and true response was once given to Alexander the Great by an apprehended pirate. When asked by the king what he thought he was doing by infesting the sea, he replied with noble insolence, “What do you think you are doing by infesting the whole world? Because I do it with one puny boat, I am called a pirate; because you do it with a great fleet, you are called an emperor.”

    You quick witted, high speed action, fast switch con artists responsible for the way things are done at the highest levels are pathetic fools to believe that might is right. You’ve brought the whole world on to our case. They ARE out to impoverish and humiliate the U.S. Yeah, there’s people just like you in the rest of the world but that doesn’t excuse your conduct nor will it save you when the depression ruins our economy.

  14. JohnnyVee commented on Jun 11

    Jim Haygood:

    Great point. But with all due respect, Feldstein doesn’t say or intimate that peak = S&P or any stock market index. In fact, if one measures the S&P in terms of Euros, instead of dollars, its about half of what it was at the height of the dotcom bubble. In other words, there never was a peak.

  15. Pool Shark commented on Jun 11



    It only measures higher if your yardstick is shrinking.

  16. Erasmus commented on Jun 11

    Today,From The

    “By the time the credit crisis finally comes to an end, U.S. home prices might have fallen in value by nearly one-third, according to a Reuters report.

    The report quoted Peter Acciavatti, a credit analyst at JPMorgan Chase (JPM – Cramer’s Take – Stockpickr), who told the news agency that the more than $300 billion in writedowns banks have already taken could mean $3.9 billion worth of credit won’t be available.

    The report said Acciavatti believes home prices might not stop falling until 2010. “The housing correction is in a down phase,” Reuters quoted Acciavatti as saying at a conference. “We’re now going through a phase of deleveraging and the pulling out of easy money.”

    JPMorgan, the report said, estimates that big banks might ultimately record writedowns of as much as $600 billion”.

    This is only the beginning.

  17. BobC commented on Jun 11

    If the dollar ends its reign as the defacto currency, there will surely be some unprecedented upheaval. But to say that it will eliminate the U.S. as a world power is a bit of a stretch. If that were true, then Russia and China could not now be world powers as their currencies are not dollars. The dollar is neither a necessary nor sufficient attribute of a world power. Would the power of the U.S. be diminished? Very likely. Would we suddenly become a second tier player on the world stage? I seriously doubt it.

  18. Mike in NOLA commented on Jun 11


    If the dollar lost it’s status as reserve currency, we’d all have to get real jobs

    BTW, if you think the S&P is bad, Shanghai A shares right now down another 2%. At this point they are down 53% off their all time close last year. Some kinda crisis has to come out of this. I had predicted this around the turn of the year and speculated that there might be political upheaval there because the government’s legitimacy is really only based on the affluence it brought to the middle and upper classes. Additionally, there are huge numbers of displaced peasants being dispossed and drifting into the cities. Out of such things revolutions are made.

  19. DL commented on Jun 12

    “…He also stated it was conceivable the United States could go through several years of higher-than-normal inflation along with subpar growth, creating a mild form of the stagflation that plagued the country in the late 1970s….”

    I agree with this part. For the next two years, I think we’ll see very weak growth together with inflation in the range of 4-7%.

    However, I’m betting on tighter money after the election (as is the Fed funds futures market).

  20. CDizzle commented on Jun 12

    I had the same thoughts as JohnnyVee and Krusty.


    1) Anyone who opines that the US economy peaked in December 2007/January 2008 and is reputable must be referring to overall production and is concurrently opinion that the economy has been in contraction since, it would seem to me.

    2) Slipping into a recession?, i.e. we’re not gonna know for 6 months after the beginning of it. Unless it’s different this time relative to the last two (both minor/very minor), the worst will be over by the time the recession is confirmed.

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