Citigroup vice chairman warns credit crisis will hit real economy in US

Analysis

The unwinding of positions in the US subprime credit market will hurt the real economy in the US, but the extent of that damage won’t be clear for another two to three months, Citigroup Inc. Vice Chairman William Rhodes said Thursday.

“We won’t know until this unwinds itself what the damage is going to be,” Rhodes told a session of the World Economic Forum. “It seems very clear, in the United States it will be an impact on the real economy and that depends on the impact on the consumer.” Economists are expressing growing concern about a possible recession in the US economy as a result of tighter credit markets in the US.

Rhodes said looking beyond the subprime crisis, his greatest concern going forward is protectionism and nationalism. “This world ‘goldilocks’ economy is being fueled by open trade and I’m very concerned by about what I see in the markets,” he said. He said the stalemate in the Doha Round of World Trade Organization negotiations and delays in the US of bilateral trade agreements point to difficulties ahead for the global economy. “When you get protectionism in the world economy, then you get nationalism - the two go together,” he said. (marketwatch.com)

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