Econintersect: Larry Summers, sometimes president of Harvard, U.S. Secretary of the Treasury, Chief Economist at the World Bank and former candidate for nomination for the Chairman of the Federeral Reserve Bank of the U.S. Board of Governors, addressed an IMF conference 08 November 2013. His topic was related to what is called by some a “liquidty trap” created by the “zero lower bound“.
The video of the talk is 16 minutes in length. Before you watch the video check out the definition of secular stagnation to which Summers refers.
Editor’s note: This interesting lecture is as important for what it didn’t say as much as for what was said. Summers refers to conditions of equilibrium when discussing economic conditions. He alludes to financial flows and financial interconnections yet the image perceived as he talks is that these “financial things” are somehow a lubricant for economic activity. He professes some puzzlement about why (using an Econintersect metaphor) the oil level in the engine is “normal” and at “equilibrium”, but yet the engine does not run as a well oiled machine.
The problem with what wasn’t said is that it could have suggested that thinking of a “normal” or “equilibrium” condition is in itself a problem, and perhaps a fundamental problem with making sense out of the variables being discussed. What if there is no “normal” or “equilibrium” for the variables of economcic systems? What if the understanding of what is going on requires that variables be characterized as:
- functions of time?
- in terms of compound multivariant polynomials and not as linear and independent functions?
When Summers uses the term “financial normalization” in this talk does that exemplify that he is missing the overriding problem entirely?
