Sunday, September 29, 2013

Sumner on Summers

A real sarcastic gem from Scott Sumner:

"At the opposite extreme is someone like Larry Summers, who worries that low interest rates and a bloated balance sheet might lead to bubbles, and misallocation of investment.  In that case fiscal policy could be “effective.”  That sort of central banker would essentially be holding the economy hostage, much as the GOP radicals in the house are accused of doing.  A central banker with that objective function would intentionally hold NGDP below the optimal path, unless and until the Federal government would assure him or her that the extra NGDP growth would be in the public sector, where (unlike the private sector) the expenditures would not be wasted on foolish projects driven by a bubble mentality.  The Federal government spends money very wisely, especially when under pressure to quickly ramp up investment during temporary slumps in the economy."

So true. 

1 comment:

  1. It will be interesting to see how much longer do central bank holds it, I think these things need to be analysis really properly, it’s just one mistake that could put us out of track, so that’s why we got to be very careful with it. I am currently working with OctaFX broker where they have epic daily market news and analysis service, it’s ever easy to follow yet highly accurate while it’s absolutely free as well which makes it even better.