Tuesday, July 12, 2016

Larry Summers Wants 
To Give You A Free Lunch
Acting Man posted essay on the consequences of central bank policies - valuations no longer make sense, the pricing of risk & assets has become distorted .. enter Larry Summers .. "Larry Summers, the man with a plan for everything and everyone. In case you don’t know him, he has solved problems all around the world from afar… Somehow Summers already knows what interest rates will be more than a generation from now. And based on the ultra-low rates that Summers sees far out into the future, he believes expansionary fiscal policy can pay for itself. In other words, federal governments have free reign to massively increase deficit spending and run-up federal debts, because, on balance, the fiscal stimulus will pay for itself. Do you buy what Summers is selling? What if bond yields don’t go down over the next generation? What if they go up? Then, instead of being self-financing, fiscal stimulus would be self-destructing. Regardless, by our estimation he’s just promising something for nothing – that he can give you a free lunch. Alas, policies like these are what got us into this mess to start with. Sound money, and the just discipline that comes with it, makes more sense to us. But what do we know? We’re lacking in many of Summers’ unique qualifications. For example, unlike Summers, we’ve never lost $1.8 billion of other people’s money."
LINK HERE to the essay

No comments: