Friday, November 22, 2013

A Classic Example Of Bad Reporting By Bloomberg News

The title of this article suggests that Larry Summers would like to use asset bubbles to create a full employment economy.  Buried in the article is a disclaimer which indicates that Larry Summers did not advocate reliance on asset bubbles to stimulate the economy.  The bulk of the article, however, explains why asset bubbles, which were not proposed by Larry Summers, are a bad idea.

The author of this article is an economics editor for Bloomberg News, which is a reasonably good news source relative to a mediocre press.  He certainly knew better than to accuse Larry Summers of something that he did not claim.  His real intention may have been to discredit Larry Summers for suggesting that the US economy may be in a state of secular stagnation.  It was easier to show how foolish a reliance on asset bubbles would be than to prove that the US economy is not stagnating as Summers suggested. 

We should keep in mind that Larry Summers referred to asset bubbles to make an important point that led him to suggest the possibility of structural problems in the US economy.  If the economy is dependent upon asset bubbles to achieve full employment, there must be structural problems in the economy that should be addressed.  Otherwise, we may be in for an extended period of slow growth and high unemployment.  He never suggested that asset bubbles were a good remedy for a stagnant economy, but the intent of the article is to deny the existence of structural problems in the economy by building a case against asset bubbles.

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