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Bloomberg Reports that Larry Summers See End of Problems

Big news from Washington – the end of the economic problems is nearing, per this Bloomberg report

Summers Sees U.S. Economic ‘Free-Fall’ Ending Soon (Update1)

By Rich Miller and Timothy R. Homan

April 9 (Bloomberg) — White House chief economic adviser Lawrence Summers voiced confidence that the U.S. economy will soon get over what he called its “sense of a ball falling off a table.”

“We can be reasonably confident that is going to end within the next few months and you’ll no longer have that sense of free-fall,” Summers, director of the National Economic Council, told a luncheon meeting of the Economic Club of Washington, D.C.

While substantial strains remain in the credit markets, conditions have eased, Summers said. Inventories have also been slashed below the level of sales, setting the stage for an eventual rise in production, he added.

His comments came in the wake of a series of economic indicators that suggest the rate of decline in the economy is slowing, including a rise in consumer spending in the first two months of the year and an increase in both home sales and housing starts in February. “There are some indications that things may not be getting any worse,” agreed Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York.

Summers said it was less clear how strong and sustainable the recovery will be. “You may get some inventory cycle but that doesn’t mean you’ve reestablished strong sustainable growth,” he said. “That’s difficult to judge.”

More Unemployment

Among the imponderables he cited in the outlook were the health of the global economy and the psychology of consumers and investors. He said unemployment would rise further after hitting a 25-year high of 8.5 percent in March.

Summers saw risks of deflation in the short-term and inflation in the longer-run. “I don’t think that concern about deflation in the nearer term can be entirely discounted,” he said. Yet he added it would be a mistake to see the current low level of inflation expectations as a reason for complacency about price pressures two to three years out.

Figures to be published on April 15 will probably show that the consumer price index hasn’t risen at all over the past year, thanks to a steep fall in energy costs, according to economists surveyed by Bloomberg News.

Summers’s appearance at the Economic Club was interrupted for several minutes by protesters criticizing the government’s bailout of financial institutions.