Don’t Get Into a Knife Fight with Larry Summers

Larry Summers is not happy with Joseph Stiglitz’s piece The Myth of Secular Stagnation, which argues that the idea of secular stagnation as put forward by Summers and others was little more than a mask for poor economic policy and performance under the Obama administration.

Those responsible for managing the 2008 recovery (the same individuals bearing culpability for the under-regulation of the economy in its pre-crisis days, to whom President Barack Obama inexplicably turned to fix what they had helped break) found the idea of secular stagnation attractive, because it explained their failures to achieve a quick, robust recovery. So, as the economy languished, the idea was revived: Don’t blame us, its promoters implied, we’re doing what we can.

Larry responds:

I am not a disinterested observer, but this is not the first time that I find Stiglitz’s policy commentary as weak as his academic theoretical work is strong.

…In all of my accounts of secular stagnation, I stressed that it was an argument not for any kind of fatalism, but rather for policies to promote demand, especially through fiscal expansion. In 2012, Brad DeLong and I argued that fiscal expansion would likely pay for itself. I also highlighted the role of rising inequality in increasing saving and the role of structural changes toward the demassification of the economy in reducing demand.

…Stiglitz condemns the Obama administration’s failure to implement a larger fiscal stimulus policy and suggests that this reflects a failure of economic understanding. He was a signatory to a November 19, 2008 letter also signed by noted progressives James K. Galbraith, Dean Baker, and Larry Mishel calling for a stimulus of $300-$400 billion – less than half of what the Obama administration proposed. So matters were less clear in prospect than in retrospect.

Indeed, Stiglitz’s piece is difficult to understand as economic commentary because it’s hard to see much daylight between Stiglitz and Summers on actual diagnosis or policy. Stiglitz, for example, points to secular reasons for stagnation when he writes:

The fallout from the financial crisis was more severe, and massive redistribution of income and wealth toward the top had weakened aggregate demand. The economy was experiencing a transition from manufacturing to services, and market economies don’t manage such transitions well on their own.

Gautti Eggerstson is not as entertaining as Summers but he offers useful background.


The two longest post war economic expansions seem to be Clinton and
Obama. Both regimes characterized by rapid deficit reduction, spending controls and higher taxes. So, with no doubt, neither Stiglitz nor Summers will find any evidence in US economic data sufficient to prove their solutions.

They have no proof, find it please and show me that proof in the current economic series since, say 1950. And, can we skip the war scenarios since we typically bomb the crap out of economic competitors.

Both Democratic booming economies followed Bush recessions. This pattern of Republican presidents screwing it up for the Dems to play clean up seems to the story of late. Wonder if Trump tariffs will lead to his administration's downfall.

The budget deficits, not the tariffs (which are bad too) will be the issue to clean up.

Good point. The more recent Republican presidents spend like everyday was a Labor day sale. Cutting taxes while increasing spending does twice the damage to the deficits than a tax-and-spend Democrat would.

On the other hand we have a sample size here of n=2. Clinton following Bush's mild recession and Obama following Bush II's big recession. Before that Republicans spent the entire 1980's claiming to be the economic growth party because Carter had a slowdown at the end of his term (Reagan actually had a massive recession early on but the bounce back came just in time for the 1984 re-election). One has to wonder if a few hundred chads had gone the other way would President Gore go down as the one who started the financial crises?

I'm skeptical that deficits will cause a problem. If they do we should see the evidence already. The market is locking up money for up to 30 years premised on inflation and interest rates remaining low.

It's probably worth noting international conditions at the time as well.

Clinton's boom years coincided with very low commodity prices, global disinflation, a global peace dividend and a one-off productivity boom that was enjoyed by many countries outside of the US.

The Bush Jr. economy had to deal with a massive increase in commodity prices, the economic headwinds of Chinese competition which outcompeted many domestic manufacturing firms, the aftermath of 9/11 which necessitated an expensive and unproductive military buildup, the end of the early gains from the PC revolution, etc.

The seed's of the Great Recession were planted in the 1990s as increasing home ownership and prices began to be seen as the primary method for increasing middle class wealth. The long boom in US housing began in 1997/1998 according to the Case Shiller index.

Presidents matter. Congress matters. But they matter a whole lot less than aggregate macro trends.

OBAMA: “Shovel-Ready Wasn’t As Shovel-Ready As We Expected.” (President Barack Obama, Remarks Before The President’s Council On Jobs And Competitiveness, Durham, N.C., 6/13/11)

Harold Hopkins didn't have shovel ready projects in 1933, when FDR put him in charge of the Civil Works Administration, either, but he hired four million people in three months and started people getting off welfare.

These are the economists that don't want to be left out of the Pound-Me-Too movement!

They must be nostalgic for the days when Larry Summers got ostracized for telling truth to mediocracy.

Stiglitz makes a bizarre observation: "The economy was experiencing a transition from manufacturing to services, and market economies don’t manage such transitions well on their own." - from what I recall, the economy has been on a downward trend from manufacturing since WWII, and it accelerated even more after 1990, so why the sudden emphasis on transition now? The extra 5% drop or so in the 00s is nothing compared to decades of decline since WWII.

Bonus trivia: I once tried to find such a transition to explain the Great Depression, but I could not find any big shift except maybe electricity, autos and ratio became more adopted during the 1920s-30s, but it's hard to pin blame on these technologies for the Great Depression, which was likely just a mass contagion phenomena.

How about farm mechanization? There was a massive surplus of rural labor and rural unemployment was high. WWII ended the depression and there was a long and ongoing movement of people to urban centers, which continues to this day.

It isn't at all clear that World War II was the cause of the depression ending considering growth per capita prior to 1941 or 1942:
1930 | 6213 | -9.94% ($12,3000 in 2017 dollars)
1931 | 5691 | -8.40%
1932 | 4908 | -13.75%
1933 | 4777 | -2.66%
1934 | 5114 | 7.05%
1935 | 5467 | 6.90%
1936 | 6204 | 13.48%
1937 | 6430 | 3.64%
1938 | 6126 | -4.72%
1939 | 6561 | 7.10%
1940 | 7010 | 6.84%
1941 | 8206 | 17.06%

(Angus Maddison)

That is 6% average annual growth from 1934 to 1940.

@Todd K - good observations, others, like Scott Sumner in his last book, and me online, have said that the Great Depression was really a bank panic that ended in 1933-34, and the rest of the decade was a slow recovery that Sumner says was too slow due to misguided government policy. Arguably we have the same slow recovery from the Great Recession today (lack of demand); is WWIII coming?

Unemployment climbed back up to 20% in 1938. The "slow recovery" from the Great Recession shows us the Fed can learn to stop hitting itself in the face with a shovel at least.

I'm waiting for Scott Sumner to chime-in on Summers' penultimate sentence: "We cannot rely on interest-rate policies to ensure full employment."

What Stiglitz is suggesting is that the Obama administration should have been willing to accept much higher levels of deficit spending. Instead, the economic recovery was left for the Fed to pursue with a policy of rising asset prices as the path to prosperity. Hmm, imagine that. The irony here is that Larry Summers, in his Okun lecture delivered in 2008 as the crisis was unfolding, blamed rising asset prices ("inflation lurking in the background") for the crisis. Hmm, imagine that. I think the expression is hoist with his own petard.

The deficit spending to which Stiglitz refers would have been the result of a large tax cut, something the Obama administration resisted, preferring instead new programs of Keynesian spending to achieve recovery. Of course, the Republicans would have supported a large tax cut, especially one designed to favor the wealthy like the tax cut passed in 2017. What Stiglitz is suggesting is that a large tax cut favoring the wealthy would have been better than the monetary policy we got that was designed to promote rising asset prices. Arguing which is worse, bad fiscal policy or bad monetary policy, reminds me of the debate whether two wrongs make a right.

Obama Keynsian spending == political payoffs.

Trump tax cuts = political payoffs

To be fair he has that PLUS keynesian spending! In spades!

A truly, remarkable and memorable post, Moo cow. Not to be forgot. Cherrio, Pip-pip


Summers was the biggest voice in the admin to keep the stimulus package small

It does not matter what he writes

When it mattered most, summers made a mistake that will be written about for centuries.

And your economics degree is from .....?

Fiscal policy is irrelevant if the central bank is targeting inflation. This is supposed to be obvious.

DailyKos University isn’t real.

But the problem here is the central bank was failing to target inflation. It wanted 2% inflation, it got 0% yet failed to keep pushing on the monetary stimulus.

Bernanke once noted that he had done all he could through monetary policy and that he needed help from policymakers. So he aparently saw the limits of the central bank to provide stimulus on its own.

Marriner Eccles (Fed chair during the 6% average annual growth noted in Todd K’s post above) also felt the Federal Reserve alone was not capable of preventing depressions. A properly managed plan of government expenditures (social security, unemployment insurance, etc.) was essential. So too was a system of taxation for a more equitable distribution of income.

Monetary stimulus alone cannot deliver both recovery and stability, because the Fed is eventually faced with a choice of asset bubbles (by continuing the monetary stimulus even as asset prices are rising rapidly) or slow or no growth (by reversing course and adopting monetary tightening to control the bubbles). Back during the debates in 2009-10 on this subject, I would make the shorthand observations that fiscal stimulus and monetary stimulus are both re-distributive, the difference being that the former is re-distributive downward (jobs and wages) while the latter is re-distributive upward (the wealthy own most of the assets). Is it any wonder that the wealthy and their representatives in Congress fought so hard for monetary stimulus and against fiscal stimulus.

Summers had a pretty weird passage about monetary policy in his "Age of Secular Stagnation" article. He wrote: "Looser money, starting with near-zero capital costs, is likely to generate demand primarily through increases in competitiveness. This is a zero-sum game, since currency movements switch demand from one country to another rather than increase it globally."

Maybe that phrasing is conditioned on hitting the ZLB, so that monetary policy only exists through relative currency devaluations. But if monetary policy is so constrained, then why are policy driven devaluations credible?

How can anyone speak of “under-regulation” when regulators distorted so much the allocation of credit with their risk-weighted capital requirements for banks based on perceived risk of assets, and not on the risks of how those assets were perceived and managed?

Let's not forget that the Austrian School attributes the great depression to the too-loose monetary policy in the 1920s that promoted "inflation" of asset prices. Whether right or wrong, the Austrians got their wish when the Fed pursued a contractionary monetary policy and asset prices fell. Thank you very much. Even Hayek later admitted that he was wrong for supporting deflation. Fast forward to 2008 an once again, rising asset prices were unsustainable and asset prices collapsed. Except this time, the Fed intervened with an expansionary monetary policy, asset prices leveled off, and asset prices eventually recovered to the pre-crisis level. So the Fed's response after the 2008 crisis is better, right. Well, it prevented another great depression. But it also preserved the conditions that led to the crisis in the first place, namely, a very high level of inequality that is promoted and sustained with rising asset prices. So, the response to the 2008 crisis should have been a contractionary monetary policy in order to deflate asset prices? That would have been the Austrian solution. Just ask Mr. Boettke. I don't believe Mr. Stiglitz would agree. His preferred solution, if Congress refused to pass fiscal stimulus through higher government spending, would have been a large tax cut rather than rely on the Fed to inflate asset prices as the path to economic prosperity. Those are the choices, the choices we will soon face again. Which one do you prefer?

The perpetrators of the great recession are too numerous too mention adequately here. You might add massive fraud and enablers like Dodd, Frank, Fannie, Freddie, S&P, Moody's, non-bank mortgage companies, bad bank mergers with non-bank mortgage companies and S&Ls all approved by the regulators, government forced mergers, etc.

Another wall of incoherent text comprised of 90% factual errors and logical fallacies.

I’ve met quite a few corporate lawyers, and I’m flabbergasted at how you can’t follow logical trains of thought. A Yale Law grad you are not.

Asset prices were obviously sustainable because they’re higher now than they were in 2008. Your theory is built on the precondition that assets were overvalued in 2008 but....correctly valued now? Or overvalued always because of greater than 0% inflation? Or overvalued because of QE?

No regime with greater than zero % inflation correctly reflects asset prices?

Or, is it any financial regime with liquidity does not correctly reflect asset prices? This is the obvious conclusion from your premises. Liquidity means trading means ‘it ain’t right’.

Everything should be illiquid, so that it ‘is correctly valued.’

The recession was not caused by inequality, that’s as stupid as it is irrelevant, it was caused by shadow banking lacking a coherent clearing mechanism to fully demonstrate the risk situation of various institutions.

Yale law grads should stick to law.

The noise is merely and murmuring, wandering far and wide in a turbulent tangle of language. This is the haunt of credulity, irresponsible error, groundless joy, unreasoning panic, impulsive sedition, and whispering. Perfectly aimed, perfectly useless.

Ferdinand was no Yale grad, but quite convincing. Likewise, for Rayward.

Some other comments use more of a “dawn of man” technique.

Government overspending at all levels is killing workers, taxpayers and consumers who don't benefit from any direct government spending. Case in point is higher education. Public unions are raping taxpayers with help from politicians.

Almost all of higher education is paid for with student loans which the gov't actually makes money one, even the ones that go into default end up being profitable because it so hard to avoid student loan debt almost everyone eventually pays it off with interest.

I liked it more when Summers sold Mexico as an example for Latin American, then his policies failed so badly than PRI's "perfect dictatorship" collapsed.

As opposed to that sh*thole Brazil, which had its longest recession in history, and the stupid voters want to reinstall the corrupt and incompetent Lula (who's in jail making a final appeal to get his name on the ballot) to replace the corrupt and incompetent Temer, who replaced the corrupt and incompetent Rousseff (Lula's heir).

President Temer is neither incompetente nor corrupt!! He was a poor man who became very rich thanks to his legal acumen. He is a famous poet. He married a woman younger than half his age. He was the Brazilian Madison, the main framer of our constitution. He opened the anual meeting of the UN Council. He was twice elected vice president of Brasil, he was three times elected House Speaker. He was accused of being a Satanista, but cleared his name. He is reforming Brazil's economy. Our president is an intellectual andd a stateman. Your is as crooked as an Englishman's teeth.

There is NO possible comparission between Brazil's market correction and the PRI's collapse, which was Soviet in size as well as in being unexpected. "Larry"'s debacle in Argentina single-handed revived Peronista populism. The man is a blackguard, humano garbage.

I find interesting that you cite the fact that Temer "married a woman younger than half his age" as an accomplishment at par with his other successes.

Even in his lesser endeavours, he has been more successful than a famous blog commenter.

Temer fiddles while Rio's National Museum burns:

1) Not true. Mr. Temer has officially declared it was a tragedy. The feels incredible sorrow.
2) When Mr. Temer was young, he wanted to be a pianista, not a fiddler.
3) It is funny how the museum was onde of the most importante ones in the whole world, but the Koch-Soros-Bezos-controlled mainstream media only started caring about it to use it as stick to hit Brazil with. There was no water in the place. I see no concerned American donating a single drop of water!!!

4) President Temer had just liberated a mountain of money to supply the museum with a FIDE prevention system to prevent such a tragedy. If that fire had started a few months from now, it wouldn't have started at all!! King João erected the building 200 years ago. There was no modern safety codes back then.
5 ) The fire was speedily controlled. The are no Californias or Chicago s in Brasil. No Los Angeles or NYC's riots. The building did nota collapse.
6) It is possible that a balloon burned down the place. It can happen anywhere. Fascista Japan used incendiary balloons against Roosevelt's America.
7) Many Brazilians invaded the burning building to save collections. Let us remember museum materiais are very flammable (which means inflammable, what a language!!!!!!)
8) Albert Einstein visited the museum once.
9) Brazil had the biggest collection of Ancient Egypt in Latin America.

What, with butter knives?

1. Stimulate.

2. is inflation picking up?

3. If yes, stop, if no go to 1.

If that policy was followed we may not be able to know if monetary or fiscal policy was the magic bullet but the 'secular stagnation' hypothesis would have been put to the test.

Nah, the whole appeal of fiscal stimulus is that it's not falsifiable. If it doesn't work, as is typical, it's because it wasn't gigantic enough. What we need is a stimulus so huge that the universe collapses into itself. The people who evolve after the next Big Bang will experience economic recovery.

The problem is the fiscal stimulus is not really fungible.

The government must buy some stuff, might buy other stuff, and probably shouldn't buy whole categories of goods or services.

What is stimulus? Is it buying more of what we know we need? Is it taking a gamble on iffy investments? Or to be real "stimulus" do you have to blow cash without expectation of return?

(As you might guess, I think that a proper stimulus targets serious investment. It has an ROI. And thus size is not the only measure.)

Return on Investment is key -- that's why bigger tax cuts is better than bailouts to companies whose business models failed in the market.

What we need is a stimulus so huge that the universe collapses into itself.

Err no. Here's the thing, if you're making this test then you have to think about why stimulus wouldn't work. If the gov't increases the purchases of goods and services in the economy, why wouldn't the economy increase the production of goods and services? The most obvious one that comes to mind is that the economy is at capacity and any increase in production can only come at the expense of some other production. This would show up as increasing inflation. This would mean depression/recession is just an illusion. Supply creates its own demand, etc etc.

If you want to say we are falling short of full employment BUT stimulus doesn't work, then you have to kind of tell us why and how it doesn't work. The few explanations offered do not strike one as passing a common sense test...(for example, the idea that consumers will see any fiscal stimulus as a hidden future tax increase and will therefore strategically offset any gov't increase in purchases exactly dollar for dollar thereby neutralizing any effect of stimulus even if the economy is below full employment).

What is stimulus? Is it buying more of what we know we need? Is it taking a gamble on iffy investments? Or to be real "stimulus" do you have to blow cash without expectation of return?

It is simply increase the purchases of goods and services produced by the economy. Those services can be investment goods, public investments (i.e. a new stadium or bridge), it could be gov't buying a fleet of new planes or post trucks, it could be gov't purchasing goods and services, it could be gov't buying services on behalf of individuals (such as expanded Medicare/caid) or it could be getting individuals to spend by giving them tax cuts or straight cash.

It is a good question to ask if fiscal stimulus works, what types of stimulus are better? I would say in the short run returning an economy to full employment is a priority. In the long run if you can do stimulus that raises the capacity of the economy, that would be ideal. But that misses the point. If you had a diabetic whose blood sugar was crashing, yes the ideal thing is for her to maintain her blood sugar by eating well balanced meals. In the immediate short run, a candy bar is perfectly fine...especially if you don't happen to have a well balanced meal already there.

I think you are missing a bet here, both politically and economically.

If there are better uses for spending, they should be an easier sell in Congress.

And if there are worse uses of funding, they have to fail opportunity costs at a minimum.

I am a fairly middle-of-the-road guy and support stimulus in recession, but I can recognize that "opportunity costs don't matter anymore, la la la" was both wrong and politically self-defeating.

Rough estimate is the US makes about $19T in GDP per year as of right about now. Let's say that's full employment. A recession that impacts 10% of the economy with unemployment would reduce GDP by $1.9T. That is the opportunity cost. The idea is that if you don't stimulate you lose that $1.9T. If it takes the economy 5 years to recover you lose $1.9T times five years It isn't that opportunity costs don't matter, it's that if you see that as the ultimate opportunity cost then putzing around arguing about whether road resurfacing is the best use of stimulus for 9 months is missing the point. People have to be put back to work fast or else really bad things are going to happen.

The diabetic analogy here follows. The diabetics blood sugar has fallen because they haven't eaten and they are going into shock. The candy bar gets them on track fast by putting sugar into their blood quickly. After the crises has past, the diet should not be candy bars but getting all worked up that you gave the diabetic a candy bar rather than a salad is missing the dynamics between short and long run.

I agree with you the reality is fiscal stimulus by gov't spending is difficult. It's actually hard to get gov't spending off the ground. Look at how long it takes to build a new space shuttle, an aircraft carrier, or even Trumps absurd wall. That's why most of Obama's stimulus was tax cuts and direct cash to individuals. If you need to spend a billion dollars in a month adding $100 to 10M people's paychecks is probably easier than trying to get a contract for a new road/tank/NASA probe executed.

"...then you have to kind of tell us why and how it doesn't work...."

That's my point. I have the standard excuse to rely upon, that it just wasn't big enough. Besides, I actually tend to think that at some point the burden shifts to the proponents to explain why it's never worked and why this time will be different, but I recognize that macro isn't exactly an empirical discipline.

See my previous post about stimulate, check for inflation, stimulate more until you get inflation. If it doesn't work you have to explain why it doesn't work, where does the stimulus go?

Suppose you have your patient with low blood sugar, doctor on the phone. "Give him a candy bar". "OK he just ate it, but the blood meter says he has low blood sugar still", "Give him another" , "OK still says low..." "Another".

You very well may have someone who can eat 50 candy bars and not see their blood sugar rise one bit. I think if this happened it's not so much snickering about how the doctor's advice is failing but really understanding what odd dynamics might be at play.

There are dynamics that happen if you stimulate too much. Prices start to rise as the economy becomes unable to produce any more goods and services and all stimulus does is bid up prices away from other production just like things will happen if the body eats too much sugar. You want to argue we could have too much stimulus or sugar *but* none of the measurable bad things that are supposed to happen from those things will happen. That seems like a strange assertion to me, strange enough to cry out "well go ahead and eat 50 candy bars and let's watch your blood levels every minute and figure out why your sugar levels don't rise".

I wish there were more study of money financed fiscal programs.

In this regard, I find myself respecting Stiglitz' diamond-brilliant analysis, and have to wonder if Summers is seeing sour grapes.

Joseph Stiglitz, in Caracas, Praises Venezuela’s Economic Policies

Despite the high rate of growth, high public spending and increased
consumer demand have contributed to inflationary pressures, pushing inflation up to 15.3%, also the highest in Latin America. However, Stiglitz, who won the Nobel Prize for economics in 2001, argued that relatively high inflation isn't necessarily harmful to the economy. He added that while Venezuela's economic growth has largely been driven by high oil prices, unlike other oil producing countries, Venezuela
has taken advantage of the boom in world oil prices to implement policies that benefit its citizens and promote economic development.
And then there's the IPCC work. Sigh.

We on the Obama economic team believed that a stimulus of at least $800 billion – and likely more – was desirable, given the gravity of the economic situation.

This was the fake ZIRP liquidity trap argument again -- Fed could have easily maintained the NGDP trend alone, even in the unlikely event of an "austere" shift to budget surplus, had that been their goal. And if Fed saw more inflation than they desired from the fiscal stimulus, they would have just offset anyway. The fiscal authorities hold only what cards the monetary authorities allow them.

Under the auspices of the government-sponsored enterprise (GSE) Fannie Mae, Stiglitz published a paper in 2002 arguing that the chance that the mortgage lender’s capital would be depleted was less than one in 500,000, and in 2009 he called for nationalization of the US banking system. So I would expect Stiglitz to be well aware that hindsight is clearer than foresight.


Exhibit A for why the Reps were idiotic in labeling Obama a commie pinko: he never advocated nationalizing the banks even though there were many lefties like Stiglitz urging it.

"he never advocated nationalizing the banks "

That's not completely correct.

"Last year, the government took effective control of mortgage giants Fannie Mae and Freddie Mac.

It stopped short of nationalizing insurance giant American International Group, but forced a major restructuring and leadership change with a $180 billion taxpayer bailout."

"Under terms of a proposed bankruptcy agreement, the U.S. and Canadian governments will own nearly 75 percent of General Motors, with the U.S. holding a 60 percent controlling stake and Canada with 12.5 percent. The UAW would get a 17.5 percent stake and bondholders would end up with the remaining 10 percent. Existing stockholders would be wiped out."

That's pretty weak 'nationalization'. Reality is if you went to Warren Buffet and said you needed $180B to save your huge insurance company, he may give it to you but it's going to come with the steep price...probably one being that the leaders who got the company in that condition will be outsted.

Anyway it seems to be bad form to complain about bank nationalization in the context of bank's taking bailouts. I personally would have let the banks fail and increase the stimulus efforts to help regular people instead, but what would such critics want? Bank bailouts with the gov't demanding absolutely nothing on behalf of the taxpayer?

News flash: The fake idea of "stagnation" was put forward as a mask for poor economic policy and performance under the Obama administration.

A crappy economy, we were endlessly told, was the "new normal." All the "low-hanging fruit" of economic expansion had been devoured. The best we could ever hope for was 1% growth, and we should be on our knees thanking Obama for delivering it.

Trump believed otherwise.

Obama was modest.

We hit as high as 5%+ under Obama and most quarters saw greater than 1% growth. Trump is running on the Obama boom. You only have to take Trump's own word for it, crowing about the longest ever expansion when he hasn't been President for even two years yet should drop a hint to anyone with even modest education and regard for the truth.

What slow recovery?,

That is real growth. Look at the recovery, a complete V. You have to adjust for the slight long term downward trend in growth. What slowed the recovery was the recovery of oil prices above $100, engineered by the stimulus. Once the stimulus ended, fracking began and we have had the longest expansion in history.

Did we recover the extra 8 trillion in debt incurred? No, but we never do, hence debt piles up, interest charges become pressing and we have secular stagnations. Standard story, stimulus was mainly bailouts by government and Keynesians lie about it.

The gov't got back almost all the money that was spent in bailouts. The bailout was passed not under Obama but under Bush. The additional debt came from a bit of stimulus (which was mostly tax cuts) combined with the fact that when you have a deep recession income tax receipts go down while payments to things like unemployment go up.

No economist here, but I do study history. So in my view, why would anyone trust Larry Summers, Alan Greenspan, or Robert Rubin ever again? They were the ones who opposed Brooksley Born’s recommendation to regulate derivatives and make them more transparent.

Much as some would like to solely blame the housing bubble for the financial crisis, let’s not forget that the financial collapse began in August 2007 when BNP Paribas suspended redemptions because they couldn’t put a value on the assets in 3 mutual funds.

In th late 1990’s, Summers actually told Brooksley Born that he had 13 bankers in his office saying that if derivatives were regulated it woulcause the worst financial crisis since the end of WW2.

Turns out, if it hadn’t been for Summers et al, and Born had gotten her way, we would probably NOT have had the greatest financial crisis since WW2.

How can someone with such amazingly poor judgment still have any credibility in his field?

In all of my accounts of secular stagnation, I stressed that it was an argument not for any kind of fatalism...

Mr. Summers, the poor dear, had no access to television or the internet in those years, or he would have seen his theory used for exactly that.

Fiscal expansion - means bigger deficits.
a) thru big gov't spending, or
b) thru tax cuts.

Obama & Summers (& DeLong & Krugman) hate tax cuts, so instead we got bigger gov't spending. Like Solyndra, and billions of other low value / high cronyism projects -- which did NOT get growth.

Fiscal expansion thru tax cuts means those making profits make more profits, and do more of the wealth generation that gets those profits. Much better than big gov't boondoggle spending.

Solyndra, yawn. Who cares? Almost half the stimulus package was tax cuts, most of the other half was money directly in people's pockets. Various ideas like cash4clunkers or Solyndra was noise.

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