Wonkblog spoke with Larry Summers about the idea of long-term stagnation in developed economies, something Summers spoke about in November and an idea that continues to resonate.
Summers’ unlikeable personality sank him in the Fed race but he’s a brilliant mind and makes great points like this:
One of the reasons for my concern was that before the financial crisis, when we had the mother of all bubbles in the housing market, that was enough to propel growth to perhaps adequate levels, but not enough to produce any kind of overheating as measured by wage and price inflation or as measured by unemployment relative to traditional low points. Imagine the economy between 2003 and 2007 without the consequences of housing bubbles and overly easy credit.
It’s not something you want to read if you’re optimistic for long-term global growth.
It’s interesting to note that the United States is probably further below its economic potential as projected five or six years ago than Japan was five or six years into its period of malaise.
