Mar 9 (Reuters)
We are much better of doing it all unilaterally.
This is the cost of having leadership that does not understand our monetary system.
Summer’s comments, ahead of next month’s G20 summit in London, suggest the U.S. administration wants all industrialised nations to pull together to engineer a demand-led recovery.
That will be music to the ears of British Prime Minister Gordon Brown who has trumpeted internationally-coordinated stimulus measures as the best way to tackle the downturn.
“The right macro-economic focus for the G20 is on global demand and the world needs more global demand,” said Summers.
Yes, but we are better off if the demand is here and they export to us.
Summers, who served as Treasury secretary under the Clinton administration in the 1980s, said the view that the market was inherently self-stabilising had been dealt a “fatal blow.”
“This notion that the economy is self-stabilising is usually right but it is wrong a few times a century. And this is one of those times,” he said.
No, it is self correcting, but the ugly way as the automatic stabilizers increase the deficit via falling revenue and rising transfer payments until the deficit gets large enough to turn it all around.