Too late Mr. Summers. I have been a long term proponent that Summers is one of a very few people who understands what kind of a fiscal mess we are in. That is the primary reason he passed on the FED Chairmanship last year. He can see and he knows what is coming down the pipeline and he wants nothing to do with cleaning it up or worst, be blamed for it. A smart individual, unlike Janet Yellen.
Yet, his solution for today’s fiscal crisis is idiotic at best (see his article below). Sure, massive Government spending might prolong current state of stagflation, but it will in no way allow us to avoid the final collapse. His suggestion is equivalent to giving a drug junky that final and massive injection of heroin. Nothing more and nothing less. Plus, it’s already too late. As our mathematical and timing work clearly indicate, the bear market of 2014-2017 is just around the corner. A sever US Recession will not be that far behind. If you would be interested in learning exactly when the bear market will start (to the day) and it’s internal composition, please Click Here.
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Larry Summers: Initiate Massive Spending Now Or Face A Severe Recession Google
CNBC Writes: Larry Summers calls on US government to spend
Former U.S. Treasury Secretary Larry Summers has urged global leaders to form a global growth strategy to combat economic stagnation and has called upon the U.S. government to ramp up investment expenditure.
Writing in the Financial Times on Monday, Summers took the opportunity to openly address central bankers and finance ministers who are gathering in Washington this week for the biannual International Monetary Fund meetings.
“In the U.S. the case for substantial investment promotion is overwhelming. Increased infrastructure spending would reduce burdens on future generations, not just by spurring growth but also by expanding the economy’s capacity and reducing deferred maintenance obligations,” he said.
“Government could do much at no cost to promote private investment including authorizing oil and natural gas exports, bringing clarity to the future of corporate taxes, and moving forward on trade agreements that open up foreign markets.”
Since the global financial crisis of 2008, loose monetary policies from central banks across the globe have resulted in record low interest rates in the hope of stimulating borrowing and spending. This has been accompanied by asset purchases by the U.S. Federal Reserve and others. Summers believes that while this may be better than the strategies put in place during the Great Depression of the 1930s, it doesn’t necessarily have a big impact on spending decisions.
Any spending this loose monetary policy induces tends to represent a pulling forward rather than an increase of demand, he said, adding that no-one can confidently predict the ultimate impact on markets of the unwinding of central bank balance sheets.
“Creative consideration should also be given to ways of mobilizing the trillions of dollars in public assets held by central banks and sovereign wealth funds largely in the form of safe liquid assets to promote growth,” he said.
“In a globalized economy, the impact of these steps taken together is likely to be substantially greater than the sum of their individual impacts. And the consequences of national policy failures are likely to cascade.”
Japan was singled out by Summers for its “dangerous” fiscal contraction as the country introduced a value-added tax at the start of the month. He poured scorn on this type of policy, suggesting that Japan’s fight against deflation (falling consumer prices) is far from over. A return to stagnation and deflation could rapidly call its solvency into question, he said.
For Europe, Summers says that there was no strategy for durable growth in place yet and called for “strong actions” to restore the banking system so that it can channel credit back into the struggling economy. In emerging markets, he said it was key that measures to bolster capital flows were put in place, thus making sure they do not become net exporters once again.
Capital has flown out of some emerging markets in recent months in anticipation of higher interest rates in the U.S. and Summers believes that it is imperative that exports to emerging markets from developed markets aren’t affected.
