The Phrase That May Break (Or Make) Larry Summers As The Next Fed Chairman

"QE in my view is less efficacious for the real economy than most people suppose," may just be the sentence that ends Larry Summers' run at becoming the next 'most powerful person in the world'. As the FT reports, the chubby ex-chief economist for Obama made these, and other, somewhat hawkish comments (entirely unacceptable for a Federal Reserve chairman) at a conference in Santa Monica in April.

In his remarks, Summers said it was likely either the economy would accelerate, or else estimates of its growth potential would have to come down: "I think the market is underestimating the pace at which the Fed will alter its current course and the consequences of that for interest rates."

Mr Summers clearly believes fiscal policy is a more effective tool than monetary policy, admitting, "more of what will determine things going forward will have to do with fiscal policy and that there is less efficacy from quantitative easing than is supposed." That will never do...


Via FT,

Lawrence Summers made dismissive remarks about the effectiveness of quantitative easing at a conference in April, raising the possibility of a big shift in US monetary policy if he becomes chairman of the Federal Reserve.


“QE in my view is less efficacious for the real economy than most people suppose,” said Mr Summers according to an official summary of his remarks at a conference organised in Santa Monica by Drobny Global, obtained by the Financial Times.




Mr Summers gave a highly optimistic outlook for the US economy – even more so than the Fed’s recent forecasts – saying the risks to growth are significantly to the upside.




Mr Summers said that while QE does little good it also does little harm. “If QE won’t have a large effect on demand, it will not have a large effect on inflation either,” he said.


Hhhm - we are not so sure of that masterpiece of deductive reasoning.


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