Saturday, July 23, 2011

Larry Summers on Debts and Recovery

I'm not a Larry Summers fan. He was a principle player in the "deregulation" fiasco. In particular he fought Brooksley Born's attempt to regulate the derivatives market, a market that grew to $64 trillion in 2008 and crashed. Summers, Greenspan, Rubin and Geithner all argued that bankers were big boys and could be "trusted" to not blow up the market. But even an idiot who looked at history can see many, many examples of markets that blew up. But Summers was an ideologue who would only see the world the way his ideological glasses let him.

I also blame Summers for failing to get Obama to fight hard for a bigger stimulus package in March 2009.

That is all water under the bridge. Here is Summers today making the right arguments about Debts, Stimulus, and Recovery...

The above video is from the CNN Money site.

When he waxes euphoric about information technology around 20 minutes into the video, I fall down laughing. The future is never as glorious as he paints it. If it were such a sure thing that technology and innovation would deliver nirvana, then people would have forgone pleasures and invested. They didn't because the future doesn't deliver in big dollops. It does deliver, but more stingily than Summers paints. Also, the future never rolls out the way prognosticators paint. It always surprises. In 2006 nobody was running around with their hair on fire prognosticating the fact that 10 trillion dollars would simply go up in smoke with the financial panic of 2008.

I remember reading Brad DeLong for years puzzling over where was the economic return from Moore's Law. As far as I can tell it still isn't all that clear how computer hardware has delivered specific economic growth. Clearly that segment of the economy has grown as more computers are sold and clearly computer use is more pervasive. But the economy doesn't double in size every 2 years like the speed of computers doubles.

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