Englund

Former Treasury Secretary Lawrence Summers “I don’t think this is a time for moral-hazard lectures or for talk about teaching people lessons,”  The Federal Deposit Insurance Corp only insures bank deposits of up to $250,000. But a large share of the money deposited at SVB was uninsured: more than 93% of domestic deposits as of Dec. 31, according to a regulatory filing. “There are dozens, if not hundreds, of startups that were planning to use that cash to meet their payroll next week,”  “I don’t think this is likely to be a broadly systemic problem.”  Bloomberg 11 March 2023 https://www.bloomberg.com/news/articles/2023-03-11/summers-warns-consequences-severe-if-svb-deposits-not-released SVB Fallout Spreads Around World From London to Singapore SVB’s collapse has led to cash crunch for startups globally Bloomberg 11 mars 2023 https://www.bloomberg.com/news/articles/2023-03-11/svb-fallout-spreads-around-the-world-as-uk-firms-plea-for-help British tech firms caught up in bank...

 developers and builders. After 1986, 747 institutions with assets of more than $394 billion (about $1 trillion in today’s dollars) collapsed into the federal Resolution Trust Corp.  When the S&Ls failed, community-based lending and much of the local home-building industry vanished. The fallout was ultimately felt up and down Main Street during the recession of 1990-91.  Wall Street was the big winner, filling the void left by the S&Ls with commercial mortgage-backed securities, or CMBS. Today, most commercial and multifamily real-estate funding is done by CMBS loans. All major financial institutions—including banks, insurance companies and pension funds—participate heavily in CMBS markets. Consequently, we are all in this together.  When the CMBS market collapsed in 2008, it plunged the global economy into the Great Recession. Taxpayers funded huge bailouts.  Without tax incentives, real estate can’t compete with other investments for essential capital....

they have forsaken the tools of interest-rate targeting for a balance-sheet approach to monetary policy supported by a breathtaking quantitative easing.  Therein lies a serious risk that was not present in the 1970s. Central bankers haven’t a clue about the links between their asset holdings and the forces of supply and demand that are currently wreaking havoc on inflation.  I was part of the staff involved in that regrettable exercise to create the first measure of core inflation, on the team that developed new metrics and wrote brilliant reports that no one ever read. Aaggregate demand is likely to be far less sensitive to central bank balance sheet adjustments than to the real cost of money, and monetary policy actions have a long lag time. Inflation is unlikely to peak soon.  And it will take far more monetary tightening than financial markets are expecting to avoid stagflation 2.0. Stephen Roach  FT 13 October 2021 https://www.ft.com/content/99eacd37-a2e0-4c74-b...

FT 12 April 2021 https://www.ft.com/content/380ea811-e927-4fe1-aa5b-d213816e9073

With plans for public borrowing and spending on a scale not seen since the second world war, the administration is undertaking a huge fiscal experiment.  If the strategy fails, ending in overheating, high inflation, financial instability and the economics of the 1970s, the US experiment of 2021 will go down as one of the biggest own goals of economic policymaking since François Mitterrand’s failed reflation in France in 1981. The whole world is watching. FT 16 February 2021 https://www.ft.com/content/49ca176d-8fa4-45a9-8c77-c837d1ad8e39 Skapar centralbankerna stagflation? Experter tvekar. https://englundmacro.blogspot.com/2020/04/skapar-centralbankerna-stagflation.html The future of fiscal policy without traditional constraints https://englundmacro.blogspot.com/2020/11/the-future-of-fiscal-policy-without.html

New respect for Keynesian economic theory. Practically everyone in power now agrees that deficit spending produces GDP growth. They differ only on its expected magnitude and duration. The few exceptions are mostly outside the halls of power. The experts I trust are split on this question, and of course no one really knows. But the debate is important philosophically.  Nothing underscores this more than the comment from my personal economic bête noire, Modern Monetary Theory exponent Dr. Stephanie Kelton. Asked whether she was worried about the stimulus bill causing inflation, she said: "Do I think the proposed $1.9 trillion puts us at risk of demand-pull inflation? No. But at least we are centering inflation risk and not talking about running out of money. The terms of the debate have shifted." Fed Chair Jerome Powell: We Need More Stimulus and Inflation Is Not a Worry Others share Summers’ concern and add more to the list. Former New York Fed President Bill Dudley wrote a Bl...

I en debattartikel i Washington Post i förra veckan varnade Summers för att stimulanserna riskerar att leda till inflation ”av en sort som vi inte har skådat på en generation”. Konsekvenserna kan bli en räntechock och gungning i det finansiella systemet. Dessutom fick han stöd av Olivier Blanchard, tidigare chefsekonom för Internationella valutafonden och även han en känd budgetduva. Joe Bidens stimulanser blir därför ett experiment med enorm betydelse.  Carl Johan von Seth DN 8 februari 2021 https://www.dn.se/ekonomi/carl-johan-von-seth-blir-joe-bidens-stimulanser-en-fatal-overdos-for-usas-ekonomi/ https://www.washingtonpost.com/opinions/2021/02/04/larry-summers-biden-covid-stimulus/

Covid response has shown inflation and interest rates no longer dictate limits on debt. Lawrence Summers, whose speech on “secular stagnation” in 2013 was the most perceptive economic pronouncement of the past decade, has argued that macroeconomics is experiencing a “revolution” similar to the seismic shift towards inflation control in the late 1970s.  From now on, there will be “a focus on assuring adequate demand and fairness in our economies”, driven mainly by expansionary fiscal policy. At some point, debt will reach a limit, but most economists are now betting that this is a very long way off. Gavyn Davies FT 1 November 2020 https://www.ft.com/content/aa63c3d3-5331-4984-b6e7-ebd47ea6e246 Secular Stagnation at IntCom https://www.internetional.se/secstag.html Lawrence H. Summers at IntCom https://www.internetional.se/summersmeny.htm

Policymakers like to congratulate themselves on how they avoided the mistakes of the Great Depression during the Global Financial Crisis We have not really addressed any of the fault lines at the heart of our economies and financial system. The low interest rate environment has given rise to a desperate search for yield, setting us up for renewed financial crisis. Larry Summers resurrected the term “secular stagnation” six years ago King’s big point is that there has been an intellectual failure at the heart of the policy response to low growth. We’ve seen it as just another Keynesian downturn, only worse, that can be treated using tried and tested, countercyclical fiscal and monetary means. As so often with analysis of this sort, King is good at articulating what’s wrong with the global economy, not so good when it comes to solutions. Jeremy Warner 22 October 2019 Secular Stagnation Money, Banking and the Future of the Global Economy, by Mervyn King.  Review by Joh...

“The consequences of another economic downturn dwarf and massively exceed  any adverse consequences associated with inflation pushing a bit above 2 percent,”  Summers said at a European Central Bank conference in Sintra, Portugal. Bloomberg 18 June 2018 Riktiga karlar är inte rädda för lite inflation https://englundmacro.blogspot.com/2010/02/riktiga-karlar-ar-inte-radda-for-lite.html

is that the private economy — unless stimulated by extraordinary public actions especially monetary and fiscal policies  and, or, unsustainable private sector borrowing —  will be prone to sluggish growth caused by insufficient demand. Lawrence H. Summers, FT 6 May 2018

The existence, and recent disappearance, of the Phillips Curve is the hottest topic among macro investors and policy makers at the moment. Gavyn Davies' blog, 22 October 2017

One way to view the situation is that there have been four serious diagnoses of the ills of the Global North.  They are: A Bernanke global savings-glut.  A Krugman-Blanchard return to ‘depression economics’. A Rogoffian-Minskyite crisis of overleverage and debt overhang.  A Summers secular-stagnation chronic crisis.” DeLong points out that each leads to different policy recommendations FT 4 November 2016 Stabiliseringspolitik

The global mortality rate from the flu pandemic of 1918 was 7000 times as large as from the recent Ebola outbreak. AIDS profoundly changed the human experience in Africa. No one knows the probability of a recurrence of these kinds of disasters. History is too short to permit reliable estimates and in any event conditions are rapidly changing because of scientific improvements on the one hand, and huge increases in global interconnection on the other. Lawrence Summers, FT blog 13 January 2016 Pandemics at IntCom Larry Summers at IntCom