STORM WARNINGS

The possibility that we are headed into a major recession has increased dramatically since last summer. As if that weren't bad enough, the supply-side bozos in the GOP will only think of more tax cuts for the top 1% instead of trying to maintain the income and spending habits of the middle and lower classes.

Here are a few of the latest warnings, starting with Prof. Larry Summers in the Financial Times:

Wake up to the dangers of a deepening crisis
By Lawrence Summers
Published: November 25 2007 18:51 Last updated: November 25 2007 18:51

Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability.

Even if necessary changes in policy are implemented, the odds now favour a US recession that slows growth significantly on a global basis.

Another article from the Financial Times:

Investors fear new round of turmoil
By Gillian Tett and Jennifer Hughes in London and Krishna Guha in Washington

Published: November 25 2007 20:32 Last updated: November 25 2007 20:32

Investors fear the financial system is moving into new credit turmoil, which could create further losses for financial institutions – and potentially hurt sentiment in the “real” economy.

Credit markets are trading at levels which imply that investors assume that the US is heading for a recession, bank analysts and economists have warned.

“Recession is getting priced in,” said Jan Loeys, economist at JPMorgan, adding that markets went into “virtual panic mode” last week.

Peter Sutherland, chairman of both Goldman Sachs International and BP, joined those voicing concern. “The US economy is in a mess,” he told TV3, an Irish TV channel, on Sunday. “There is a whole big issue...which has not fully played out in regard to providing credit and liquidity to institutions, so I think it is a dangerous period for the world. I think we are going to go through next year, certainly the first half of next year, with considerable traumas.”

Nouriel Roubini provides a nice overview of the situation in "Liquidity and Credit Crunch in Financial Markets is Back to Summer Peaks, Only Much Worse and More Dangerous"