Summers: “Major slack” to remain in US economy– Setting stage for second stimulus?

Obama economic adviser Larry Summers says that major slack will remain in the US economy for the foreseeable future. He sees grounds for concern on the US labor market from both a structural and cyclical perspective. That’s fancy way of saying that unemployment won’t return to pre-recession levels for a long, long time.

Lack of demand will be a major constraint on output and employment in the foreseeable future, Summers adds, (no V-shaped recovery in his model…) while measures which raise demand can help spark a virtuous cycle in the economy, he says. (Or they can just be money down a rat hole). Sounds like Larry is setting the stage for a second stimulus…

The combination of major slack in the economy and the fact that the vast majority of the Fed’s stimulative monetary injections being put on deposit right back at the Fed are the reasons I do not see hyper-inflation and a collapse in the dollar as inevitable, unlike many pundits.