Happy 4th of July to the world’s second worst economist — Larry Summers

Any scientist who made such massively incorrect explanations and predictions would be laughed out of town. Not so, one of the ‘smartest guys in the room’ and former Harvard President Larry Summers.

Here’s Larry in December 2013 coming up with ‘secular stagnation’ to explain why the recovery from recession was one of the weakest and slowest on record and why this was the way things would be, and we’d better get used to it.

Here’s the link — http://larrysummers.com/2013/12/15/why-stagnation-might-prove-to-be-the-new-normal/

Here’s a direct quote from the beginning of the article

” Is it possible that the US and other major global economies might not return to full employment and strong growth without the help of unconventional policy support? I raised that notion – the old idea of “secular stagnation” – recently in a talk hosted by the International Monetary Fund.

My concern rests on a number of considerations. First, even though financial repair had largely taken place four years ago, recovery has only kept up with population growth and normal productivity growth in the US, and has been worse elsewhere in the industrial world.

Second, manifestly unsustainable bubbles and loosening of credit standards during the middle of the past decade, along with very easy money, were sufficient to drive only moderate economic growth.

Third, short-term interest rates are severely constrained by the zero lower bound: real rates may not be able to fall far enough to spur enough investment to lead to full employment.

Fourth, in such situations falling wages and prices or lower-than-expected are likely to worsen performance by encouraging consumers and investors to delay spending, and to redistribute income and wealth from high-spending debtors to low-spending creditors.”

There’s more but (mercifully) this is enough to give you the gist.

Then we have Larry from May 2017 — here’s the link

What history tells us about Trump’s budget fantasy

Here’s Larry talking about the Trump claim of 3% economic growth “The Trump economic team has not engaged in serious analysis or been in dialogue with those who are capable of it so they have had nothing to say in defense of their forecast except extravagant claims for their policies. Taking their supply-side perspective, do they really believe that through tax cuts and deregulation they are going to accomplish more than Ronald Reagan, who after all reduced the top tax rate from 70 to 28 percent? Between 1981 and 1988, GDP per adult grew by an average of 2.5 percent, distinctly slower than what they are forecasting. Even this figure reflects a substantial cyclical tail wind from the decline in unemployment from 7.6 percent to 5.5 percent (which from Okun’s law implies adding about half a percent to GDP growth) — something unavailable in the present context.”

Now follow the following link to the actual numbers — https://www.statista.com/statistics/188185/percent-chance-from-preceding-period-in-real-gdp-in-the-us/.

At the time Larry was writing in 2nd quarter of 2017, economic growth that quarter would hit 3% right under his nose.

Of the 8 quarters from then through the 1st quarter of 2019 (2nd quarter results not in yet), economic growth was 3% or greater in half, and always over 2.5 in the other half.

OK back to the science in subsequent posts.

For the world’s worst economist  — see https://luysii.wordpress.com/2019/07/03/happy-fourth-of-july-to-the

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