Evening Must-Read: Lawrence Summers: An Agenda for the IMF

Lawrence Summers: An agenda for the IMF: “In the face of inadequate demand, the world’s primary strategy is easy money….

All this is better than the kind of tight money that in the 1930s made the Depression great. But it is highly problematic as a dominant growth strategy.We do not have a strong basis for supposing that reductions in interest rates from very low levels have a large impact on spending decisions. We do know that they strongly encourage leverage…. We cannot confidently predict the ultimate impacts of the unwinding of massive central bank balance sheets on markets or on the confidence of investors. Finally, a strategy of indefinitely sustained easy money leaves central banks dangerously short of response capacity when and if the next recession comes. A proper growth strategy would recognize that an era of low real interest rates presents opportunities as well as risks and would focus on the promotion of high-return investments… infrastructure spending… promote private investment, including authorizing oil and natural gas exports, bringing clarity to the future of corporate taxes… moving forward on international trade agreements…. Europe has moved back from the brink… But no strategy for durable growth is yet in place and the slide toward deflation continues…. A global growth strategy framed to resist secular stagnation rather than simply to muddle through with the palliative of easy money should be this week’s agenda.”