Comments on: What to do about secular stagnation? http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/ Sat, 21 Jun 2014 15:30:06 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Macroeconomist http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-980 Thu, 30 Jan 2014 15:52:23 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-980 Lawrence Summers is a fine fellow and, like the majority of today’s economists, well grounded in the economics of the Great Depression as presented by Keynes and Hayek eighty years ago for the UK economy. Thus in this article he presents the two Keynesian policy concepts of lower short term rates to encourage investment and more government spending.

Alas for his solutions, economic institutions have changed in eighty years and the US economy and its central bank do not function as the UK’s did eighty years ago; similarly the UK centralized budget process is totally different from that of the UK.

The problem is simple: today’s economic thinking is still dominated by the eighty years old UJ-oriented theories and policies of the great economists of that era – Keynes and Hayek instead of those of the great economists of this era – Stigler and Lindauer.

Thus we hear the old economists and their students still looking at the Fed’s target rate of interest and thinking it comparable to the UK’s bank rate at which the banks can borrow money to loan for businesses and consumers. One has to be quite naive, or at least a Federal Reserve governor, to believe that a US commercial banker will borrow money that has to be repaid in 24 hours and loan it out for months and years so people can buy houses and cars and businesses can buy equipment and have sufficient working capital. Same with government spending – the UK is centralized and its parliament controlled by the government. Fiscal changes can occur quickly. The United States has decentralized governments and checks and balances – a fiscal change takes years and years, not days as in the UK.

Summers’ naive answers are not, and cannot, be the basis for an economic recovery. And we can not get there by reducing or imposing regulations (Hayek) or lowering short term rates or increasing Federal Spending (Keynes). It’s the theories and policies of Stigler and Lindauer that apply today, not those of eighty years ago.

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By: 2Borknot2B http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-979 Wed, 22 Jan 2014 18:35:16 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-979 Dearest Larry and Gavin, “We have the financial and the ever-improving technological capabilities to ensure that a child born anywhere in the world can live a long, healthy life.” WE HAVE THE CAPABILITY TO DO THIS RIGHT NOW IN AMERICA WITH UNIVERSAL HEALTH CARE. We can save the world after we save ourselves. MOTO = Honesty, Responsibility, CARE OF SELF, then care of others.

“By making sure life-saving medicines, vaccines, malaria bed nets, diagnostic tests and other health tools are delivered to everyone” IN THE USA VIA UNIVERSAL COVERAGE, “we could dramatically cut deaths caused by the traditional scourges of the poor world” — POOR DIETS, POLLUTED WATER AND LANDS, POVERTY, CANCER and “like AIDS, TB, malaria, and childhood pneumonia and diarrhea — to low levels everywhere.”

“Achieving such a grand convergence” RIGHT HERE AND NOW ! “would close the global health gap.” That would improve the quality of life for all Americans and would simultaneously increasing human happiness, and that would increase individual choices and their productivity in their personal lives, and that in turn boosts social, scientific and economic growth.

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By: COindependent http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-978 Thu, 09 Jan 2014 17:56:39 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-978 A summary of Summer’s article…”Perot was correct”.

That giant sucking sound that Perot was criticized for in the 1980’s is our current reality. We opened our shores to production from other countries and our jobs went with it.
Throw in the EPA that kills virtually any industry that creates “emissions” such that even light manufacturing has been outsourced.

And, when one adds in 11+ million illegals “doing the jobs Americans won’t do” (really?) in spite of the fact it was Americans (not illegals) that built virtually every home and building, the national infrastructure, supplied two World Wars and countless other conflicts, and poured every yard of concrete, for almost two centuries.

Anyone who believes that the immigration “reform” AND more entitlements (income redistribution) promoted by the POTUS and his minions will make things better is delusional. It will kill job creation for AMERICANS willing to work for the next 50 years.

The problem, unequivocally, is the POTUS and Congress. The buck stops there!

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By: OneOfTheSheep http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-977 Wed, 08 Jan 2014 21:02:11 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-977 @tmc,

“…a self-contained conundrum…”? Thank you. That compliment indicates that you, too, understand there are many yin-yang interrelationships that make political and/or economic “solutions” complicated (and difficult).

You are a thinker with an open mind. As the saying goes, when two people always agree, one of them is unnecessary. I comment on Reuters in the hope that there are legions “out there” like you, a “silent majority” that does not comment but regularly reads comments.

Reality in the “real world” seldom aligns itself with any specific political or economic policy. Accordingly, anyone genuinely looking for the “best compromise” (and it will ALWAYS be a compromise) must look beyond the blinders of personal interest and/or partisanship and perceive the conflicting and competing interests in every challenge.

JL4 made no comment in this thread. She has limited experience and perspective and WAY too much anger to take seriously very often. Even the clock that is stopped is right twice a day.

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By: tmc http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-976 Wed, 08 Jan 2014 13:43:10 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-976 Pretty good post there @ZGHermann. I like your thought line.
@OTSS my friend, you are a self contained conundrum. You are correct in many ways. But so is @JL4.

It is nice to know that many people see what is truly happening. We all don’t agree on a solution yet and probably never will, but it’s nice to see we’re all looking for one.

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By: ZGHermann http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-975 Tue, 07 Jan 2014 23:25:11 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-975 I think “secular stagnation” is a fancy name to the realization that constant quantitative growth is simply impossible in a closed and finite natural system where humanity interconnected into a globally interdependent “super-organism”.
We can imagine a picture where cancer cells, used to taking for themselves as much as they wanted, way beyond their natural necessities, endlessly growing, blowing bubbles at the expense of others and the environment, suddenly realize that unless they learn how to use the interconnections in between them in a mutually benevolent, mutually complementing way, neither them or the system will survive.
We each have become cells and organs of this “human super-organism” and together we have to learn what our roles are in this living, integral system, how much we need for our optimal functioning, how much we need to contribute to the whole so it remains healthy and sustainable and live our lives accordingly.
It is a very simple system, everybody receives from the system 100% according to their 100% mutual contribution according to their necessities but not more.
There will still be leaders, CEOs living in penthouses traveling in limousines, and simple farmers traveling on horseback or bicycles living in small houses, but exactly according to what they need so they can contribute to the society in their best possible way.
So far we operated like huge storehouses along a railway line, although the freight train started with enough for everybody to live a normal, healthy lifestyle, since the first stations took everything the could stuff into their storehouses regardless of their necessities, after the first couple of stops the train has become empty.
We will not be able to operate like this any longer.
New life based on natural necessities, and available resources.

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By: OneOfTheSheep http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-974 Tue, 07 Jan 2014 20:01:42 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-974 @AdamSmith,

Same story, different perspective. America has always held itself up as a shining example of self-determination. Until recently, we didn’t really need the “”market protection” tariffs provide. American businesses had the “American economy” as their own “private fishing pond” because the great distance separation of the oceans made goods shipped from elsewhere enough more expensive that any price advantage they might have was lost.

Then “foreigners” came here and developed their own educational systems such that they could manufacture efficiently, and the design, registration and operating costs of ever-larger tankers and container ships reduced the cost of shipping to insignificance. Their cheaper labor costs enabled their products to “eat our lunch” and take over whole segments of manufactured products.

Our “largest and strongest” middle class, possible only because America was the “Arsenal of Democracy” in WW II, Korea and the Cold War without ever having actual fighting and associated damage within the continental United States, has today realized it’s very existence was but a temporary aberration of history. Welcome to reality, folks. Foreign businessmen taking America at it’s word and out-competing us to do certain things are not “snake oil salesmen”. They are honest global competitors.

Anyone feeling “betrayed” or “stabbed in the back” must be part of one of our many generations raised to only know good times. They don’t understand periodic economic cycles or that they are ENTITLED to NOTHING just for showing up. Everyone doesn’t get a trophy.

A small enterprising elite who can look ahead and put together ventures that profit from globalization are doing so, hugely resented by the ever-envious hammer and saw wielders, the non-tenured university staff and burger flippers, etc. that know not how to participate profitably in the “new global economy”. Suck it up!

It ain’t that hard, folks…find a need and fill it; or figure out how to make whatever you can do needed by someone able and willing to pay you. In this regard it helps if you have decent teeth, aren’t covered in tattoos and/or body piercings, speak reasonably understandable English and understand enough math to make accurate change. Oh, I just described the hard core unemployed? Who’d a thought it?

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By: AvraamJDectis http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-973 Tue, 07 Jan 2014 16:08:11 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-973 .
Demand constraints could be addressed by switching the federal government to pure bond financing.

That means abolishing corporate and personal income taxes and raising revenue through floated bonds paid off by QE type operations.

Federal taxation has not been necessary since the gold standard was abolished.

Inflation could be controlled through interest rates, bank reserve requirements, spending restraint and the like.

All income earners would have more to spend at the risk of higher interest rates. Unproductive tax collection and tax avoidance activities would largely cease.

There are political advantages as well in the sense that federal spending becomes easier to effect and the endless tax level debate would no longer exist.
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By: AdamSmith http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-972 Tue, 07 Jan 2014 14:48:10 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-972 America had the worlds largest, most lucrative market: itself.

America, since the days of George Washington and Alexander Hamilton, had always, always, protected itself with a strong protective tariff.

Then came the snake-oil salesmen, telling us that globalization would be a wonderful thing. (What they meant was that it would be wonderful for them, not us.)

America, with the largest and richest middle class of all the countries in the world, had the most to lose from globalization. And now we have lost it, our amazing middle class.

The American people have been betrayed, stabbed in the back, by a small wealthy elite who have gained immensely by globalization.

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By: thinkb4 http://blogs.reuters.com/lawrencesummers/2014/01/06/what-to-do-about-secular-stagnation/#comment-971 Tue, 07 Jan 2014 14:23:51 +0000 http://blogs.reuters.com/lawrencesummers/?p=409#comment-971 I agree with LS that investment in infrastructure and legislated incentives to force change in the energy sector are the best ideas for encouraging further growth in the economy. This will create jobs across the spectrum of employment, and most importantly, for blue collar workers, those without a college degree. Local governments especially have been gutted by the collapse of the housing market. City, county and state budgets contract out most of their work to local small businesses in their area. Without money to spend for these local projects, many small businesses go under or cut back drastically on their employment.
And it isn’t a question of whether or not the US has the money. The US has plenty of money. It’s just a question of where we want to spend it, here or overseas.

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