Larry Summers spoke at the American Economic Association meeting in Philadelphia on Saturday (along with several members of the Fed – see weekend posts here, here, here and here), said:
- The US economy is undergoing a period of “secular stagnation” where there are not enough good investment opportunities to enable full employment
- “We may be doomed to oscillation between inadequate and slow growth and bubbly, unsustainable and problem-creating growth. Fiscal consolidation in such circumstances is a step importantly in the wrong direction,” the situation requires “direct fiscal policy action”
- The Federal Reserve’s loose monetary policy risked creating asset bubbles and therefore could not be pushed much further to support the expansion
- The government should focus on productivity-enhancing investments in infrastructure to spur spending
