Summers on the crisis

[Brad De Long]

>[An excerpt from the Larry Summers portion of a Moscow press conference;
>White House transcript. Note his description of the Clinton economic
>strategy - exports, investment, exports, and fiscal discipline, which
>implies a so-far nonexistent repression of domestic demand and the
>encouragement of capacity expansion, which is not the way to fight
>deflation.]

That's not completely fair. Since January 1993 Summers (and Bentsen, and
Rubin, and Tyson, and Stiglitz, and Yellen) have been beating up on the
Bank of Japan and the Bundesbank to follow easier-money policies, and on
the Japanese government to fix its banking system and run large deficits.

The biggest problem with fiscal expansion as a policy for the United States
is that the Presidential-Congress loop is about twice as long in time as
the Greenspan Federal Reserve decision loop: the Federal Reserve can (and
does) undo whatever stimulus fiscal policy could achieve...

So U.S. administration economic policy is reduced to (i) fiscal discipline
(to try to get investment and productivity growth up), and (ii) begging the
Federal Reserve to behave (which it has... mostly... so far...)


>
>
>      Q But we didn't offer them concrete help for their economic
>emergency today, correct?
>
>      DEPUTY SECRETARY SUMMERS:  Yes.

This is really depressing. $4 trillion spent over two generations to defend
America from the Commies, and total aid to Russia and the successor states
since Gorbachev's change of course amounts to... what? $40 billion in cash
terms from all of NATO? 1%?

Brad DeLong