Monday, April 7, 2014

Larry Summers Wants The IMF To Be Empowered To Fight Secular Stagnation

The IMF shares Larry Summers' concerns about the medium term prospects for economic growth.  Congress has an opportunity to empower the IMF to play a vital role in the global economy.  Summers argues that quantitative easing (QE)  has been helpful in preventing a global depression.  It has certainly increased asset values and it has rewarded financial activity, but it has encouraged spending at the expense of demand for products and non-financial services. 

Summers' provides an overview of many of the problems that he observes in the global economy and he suggests some of the things that governments and the IMF might do to deal with the problem of secular stagnation, which is a problem of insufficient demand.  He argues that taking some of his suggested steps will have a multiplied effect on demand, and he warns that a failure to do so would have a multiplied effect on secular stagnation.

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