Summers: The Economy is Sick

June 13th, 2011 at 9:55 pm | 2 Comments |

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The Huffington Post reports:

Safely removed from the Obama White House, where he was a prime architect of economic policy, Larry Summers now tells us what most regular people have known for too long: The economy is ailing and in grave need of help.

In a sobering and clarifying opinion piece in Sunday’s Financial Times, Summers laments that “the US is now halfway to a lost economic decade,” describing a contemporary scene in which “new college graduates are moving back in with their parents.”

Most strikingly, Summers takes direct aim at the assumption that amounts to the default stance inside the White House: If we demonstrate our resolve at attacking long-term budget deficits by cutting spending, the market will gain “confidence” — a mystical term among practicing economists. Eventually, everything will get better.

Nonsense, Summers effectively scoffs. “A sick economy constrained by demand works very differently from a normal one,” he writes, before calling for a fresh stimulus while pointedly rejecting deficit-cutting as the fix. “The fiscal debate must accept that the greatest threat to our creditworthiness is a sustained period of slow growth.”

Translation: For those offering up scary warnings that a failure to slash spending courts the prospect of Uncle Sam running out of money and defaulting on his debts, the quickest way there is to slash spending and ensure that commerce grinds to a halt.

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2 Comments so far ↓

  • pnumi2

    Good link, D Furlano

    How long can one say ‘the double dip’ is just around the corner? After 2 years doesn’t one have to accept the fact that either it is never going to appear or it already has? More likely, it has transformed itself into something never seen before and consequently not yet recognized by the so-called experts.

    The expression ‘deficit hawks’ lends a sense of concern to a pack of mindless partisans, who are using the debt/deficit issue to regain what they believe is their entitled position at the head of the U.S. Government. They are so far from having the intellectual acuity to comprehend the seriousness of the situation and its complicated solution, that they are not only willing to cut off their nose to spite their face, but they are determined to burn down the house to get rid of ants.

    As for pulling the economy out of its tailspin by increasing supply, that’s as counterproductive as cutting spending/demand. The worst recession I can remember before this was the recession of 1974. It was called an inventory recession because of the large inventories business were carrying. What is supply but unsold inventory on the shelf?

    And when an supply of merchandise remains unsold, what else can a manufacturer to do but lay off workers who produced it, until the inventory is sold out?

    In 1913 when the Fed was created, one of the intentions was to remove economic decisions from the brainless creatures elected to the House and the Senate. It should be no surprise to any one now that these bought-and-paid-for individuals, the very same who created our debt and deficits, are trying to insinuate themselves back into financial policy making after their financial legislation brought the nation to the brink of catastrophe.

    The Tea Party people with their tea cup brains will have it no other way.