Summers Warns the Biggest Economies Are Not Prepared for Another Recession
By Christopher Condon , Joao Lima , and Paul Jackson
Bloomberg.com
June 19, 2018
Former Treasury secretary comments at ECB Forum in Portugal
Conseqences of downturn would dwarf risk from higher inflation
Former U.S. Treasury Secretary Lawrence Summers warned that developed countries are badly equipped for another recession, both economically and politically, and central banks should be wary of raising interest rates just to control inflation.
“The issue that’s preoccupied monetary policy for the generation before the financial crisis — the avoidance of inflation — is no longer the top issue,” Summers said in a Bloomberg Television interview with Stephanie Flanders on Tuesday. It’s the “maintenance of sound growth and getting to full employment.”
The remarks come as the world’s most powerful monetary policy makers start scaling back the extraordinary levels of support they’ve lent their economies since the financial crisis a decade ago. Summers was echoing comments he made late on Monday, at the opening of an event in Portugal that brings together some of those figures, including Federal Reserve Chairman Jay Powell and European Central Bank President Mario Draghi.
Asked about those who say economies have recovered since the financial crisis, Summers said that massive stimulus — including a fiscal boost and unsustainable stock market gains — has obscured the full picture.
“It may be that if policy stays on guard with relatively expansionary monetary policy, with fiscal policies that are traditionally regarded as imprudent, we may keep this going for a while,” he said. “But we’re living with a very brittle economy.”
The Rest…HERE
