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Posts Tagged ‘Larry Summers’

EconomicPolicyJournal.com: Larry Summers As An Economic Fascist

Posted by M. C. on September 7, 2019

Yes, Summers is now an economic fascist. Yes, he is calling for an American Hermann Göring.

https://www.economicpolicyjournal.com/2019/09/larry-summers-becomes-economic-fascist.html

Former Treasury Secretary Larry Summers is out with an op-ed in the Washingon Post.

In his essay, he appears to give full support to the Business Roundtable declaration that corporations should no longer solely be seeking profit but have “a fundamental commitment to all stakeholders.”

This declaration on its own reveals the lack of understanding of the nature of free markets and the profit and loss system. See: Should the ‘Business Roundtable’ Change Its Name To ‘The Profit-Haters Roundtable’?

But Summers takes things even further down the halls of economic distortion mirrors.

He writes:

If the Business Roundtable is serious about stakeholder capitalism, and if responsible firms are to flourish and spread their benefits, it will not just decree principles according to which its firms will operate but will also push for laws and regulations that support firms’ ability to stand up for their stakeholders. These might include minimum-wage and benefits requirements and broader mandates to protect companies that want to do right by their workers from those competing companies that are ruthlessly pursuing shareholder interests. Or they might include rigorous restrictions on advertising and promotion practices, so firms who are honest and transparent are not placed at a competitive disadvantage. Or universally high capital standards on financial institutions, so that imprudent willingness to take on risk cannot be a competitive advantage.

I am careful about throwing the term fascist around but his call is for economic regulation of corporations in an across the board fashion for the “better of the nation” that can not be labeled anything else.

Under his proposed policy scheme, it would mean that corporations are private in name only and that the true ruler becomes the state. It would be a massive step in the direction of the destruction of free markets and result in the accompanying inefficiencies, suffocation of creativity and cronyism that are inherent in the middle to late stages of a centrally planned economy.

As Murray Rothbard put it:

 [P]rivate ownership, subject to comprehensive government control and planning. This [is], of course, fascism.

And:

 … since ownership is, de facto, the control of a resource, a Nazi, Fascist, or other “centrally planned” system is as much “socialism” as a Communist regime that officially nationalizes property.

Yes, Summers is now an economic fascist. Yes, he is calling for an American Hermann Göring.

RW

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Larry Summers Comes Clean Ahead Of J-Hole, Admits Central Planners Are Impotent | Zero Hedge

Posted by M. C. on August 22, 2019

https://www.zerohedge.com/news/2019-08-22/larry-summers-comes-clean-ahead-j-hole-admits-central-planners-are-impotent

by Tyler Durden

Larry Summers is not one to be shy about sharing his opinion on any and every media channel about just how bad President Trump’s policies are, and how much better everything was in the world under President Obama.

However, in an epic thread of apparent honesty, the former director of the National Economic Council for President Obama took to Twitter to dispel any myths about the omnipotence of central planners and to confirm there’s nothing anyone can do to save the world from doom (especially Jay Powell’s speech tomorrow).

Mea Culpa? Or partisan political pandering to reinforce the “recession is imminent and there’s nothing to stop it and it’s Trump’s fault and that means Trump’s unelectable” narrative?

You decide…

Summers begins his diatribe by addressing the big imminent issue ahead of us:

“Coming into Jackson Hole, economists are grappling with a major issue: Can central banking as we know it be the primary tool of macroeconomic stabilization in the industrial world over the next decade?

His worry – they are running out of ammo and what ammo they have is losing its mojo…

This limited space for interest rate cuts is true of the US, which has the highest interest rates in the industrialized world. It is even more true of Europe and Japan. 3/

QE and forward guidance have been tried on a substantial scale. We are living in a post QE and forward guidance world. It is hard to believe that changing adverbs here and there or altering the timing of press conferences or the mode of presenting projections is consequential. 4/

Then, Summers goes after central planner over-confidence…

Black hole monetary economics – interest rates stuck at zero with no real prospect of escape – is now the confident market expectation in Europe & Japan, with essentially zero or negative yields over a generation. The United States is only one recession away from joining them. 6/

Everywhere in the industrial world, the risks of a sharp upturn in unemployment appear greater than the risks of a sharp upturn in inflation (even though market expectations of inflation are clearly below 2 percent targets). 7/

The one thing that was taught as axiomatic to economics students around the world was that monetary authorities could over the long term create as much inflation as they wanted through monetary policy. This proposition is now very much in doubt. 8/

Wait, what!!!??

Call it the black hole problem, secular stagnation, or Japanification, this set of issues should be what central banks are worrying about. 10/

In our forthcoming paper, we argue that it minimizes our predicament to see it – as is current consensus – simply in terms of a falling neutral rate, low inflation, and the effective lower bound on nominal rates. Secular stagnation is a more profound issue. 12/

Limited nominal GDP growth in the face of very low interest rates has been interpreted as evidence simply that the neutral rate has fallen substantially. There may well be more to it than that. 13/

We believe it is at least equally plausible that the impact of interest rates on aggregate demand has declined sharply, and that the marginal impact falls off as rates fall. 14/

And then Summers drops the real hammer – rate cuts are useless… or worse, are actually worsening the situation.

It is even plausible that in some cases interest rate cuts may reduce aggregate demand: because of target saving behavior, reversal rate effects on fin. intermediaries, option effects on irreversible investment, and the arithmetic effect of lower rates on gov’t deficits. 15/

If the central problem for macroeconomic stabilization is a falling neutral real interest rate – what might be called “old new Keynesian” economics – monetary policy can achieve full employment if it can get the interest rate low enough. 17/

In contrast under the secular stagnation view we have outlined – what might be called “new old Keynesian” economics – interest rate cuts, even if feasible, may be at best only weakly effective at stimulating aggregate demand and at worst counterproductive.  18/

First, financial instability. The financial crisis had roots in bubbles & excessive leverage caused by efforts to maintain demand after the 2001 recession. Japan’s late 1980s bubble had roots in a low interest rate tight fiscal environment after the 1987 stock market crash. 20/

Second, risks of zombification of firms. Firms that do not face debt service payments are like students who do not have to take tests. They can drift along complacently & ultimately unsuccessfully. And low rates may contribute to increased monopoly power and reduced dynamism. 21/

Third, risks of bank failures. Low rates crowd bank profits and franchise value, making them more vulnerable to adverse shocks at any given level of regulatory capital. 22/

Fourth, risks of further reducing monetary policy effectiveness. To the extent to which rate cuts now “borrow” demand from the future as firms and consumers bring forward investment and durable purchases, low rates now may imply less effective monetary policy in the future. 23/

Summers then goes further – blasting Central planners for claiming they can “contain” the issues…

Obviously fiscal policy needs to be a major focus, especially given what low or negative interest rates mean for the sustainability of deficits. 25/

But the level of demand is also influenced by structural policies: e.g. pay-as-you-go social security, higher retirement ages, improved social insurance, support for private infrastructure investment, redistribution from the high-saving rich to the liquidity-constrained poor. 26/

The high inflation and high interest rates of the 1970s generated a revolution in macroeconomic thinking, policy and institutions. The low inflation, low interest rates and stagnation of the last decade has been longer and more serious and deserves at least an equal response. 27/

But at least he ends on an upbeat note ahead of Jay Powell’s speech tomorrow…NOT!

So, after that 28 tweet thread of self-flagellation, wouldn’t it have been more interesting if Summers had said all that oh, ten years ago?

Be seeing you

Cartoon of the Day: Central Planning #Failure

 

 

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Can We Trust Experts? – LewRockwell

Posted by M. C. on July 25, 2018

https://www.lewrockwell.com/2018/07/walter-e-williams/can-we-trust-experts/

By 

Former Treasury Secretary Larry Summers predicted that if Donald Trump were elected, there would be a protracted recession within 18 months. Heeding its experts, a month before the election, The Washington Post ran an editorial with the headline “A President Trump could destroy the world economy.” …

Nobel Prize-winning economist and New York Times columnist Paul Krugman warned that the world was “very probably looking at a global recession, with no end in sight.” By the way, Krugman has been so wrong in so many of his economic predictions, but that doesn’t stop him from making more shameless predictions… Read the rest of this entry »

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An Escalating War on Cash

Posted by M. C. on February 26, 2016

https://www.lewrockwell.com/2016/02/no_author/escalating-war-cash/

An Escalating War on Cash

On February 16th, The Washington Post printed the article, “It’s time to kill the $100 bill.” This came on the heels of a CNNMoney item, the day before, entitled “Death of the 500 euro bill getting closer.” The former cited a recent Harvard Kennedy School working paper, No. 52 by Senior Fellow Peter Sands, concluding that the abolition of high denomination notes would help deter “tax evasion, financial crime, terrorist finance, and corruption.” In recent days, former Treasury Secretary Larry Summers, ECB President Mario Draghi, and even the editorial board of the New York Times came out in support of the elimination of large currency notes. Apart from the question as to why these calls are being raised now with such frequency, the larger issue is whether these moves are actually needed or if they merely a subterfuge for more complex economic manipulations by central banks to extend control over private wealth. Read the rest of this entry »

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