Officialdom - Economy Is DOA, Recession Is Here

[link to www.telegraph.co.uk]

Morgan Stanley Issues Full US Recession Alert
by Telegraph UK - snip:
12/13/07

Morgan Stanley has issued a full recession alert for the US economy, warning of a sharp slowdown in business investment and a "perfect storm" for consumers as the housing slump spreads. In a report "Recession Coming" released today, the bank's US team said the credit crunch had started to inflict serious damage on US companies. "Slipping sales and tightening credit are pushing companies into liquidation mode, especially in motor vehicles," it said. "Three-month dollar Libor spreads have jumped by 60 to 80 basis points over the last month. High yield spreads have widened even more significantly. The absolute cost of borrowing is higher than in June." "As delinquencies and defaults soar, lenders are tightening credit for commercial, credit card and auto lending, as well as for all mortgage borrowers," said the report, written by the bank's chief US economist Dick Berner. He said the foreclosure rate on residential mortgages had reached a 19-year high of 5.59pc in the third quarter while the glut of unsold properties would lead to a 40pc crash in housing construction. "We think overall housing starts will run below one million units in each of the next two years -- a level not seen in the history of the modern data since 1959," he said.... Morgan Stanley is the first major Wall Street bank to warn that it is may now be too late to stop a recession, though most have shifted to an ultra-cautious stance in recent weeks. The bank at first treated the August crunch as a "mid-cycle correction", much like the financial storm after Russia's default in 1998. But the collapse of the US commercial paper market has now continued for seventeen weeks, suggesting a "fundamental deleveraging of the banking system"...