No, Larry Summers is not saying that. Here's Summers giving his views and what the Fed should have done and what it should be doing going forward.nisiprius wrote:Do I understand Summers to be saying that interest rates are now so low that the Fed can't goose the economy out of a recession by lowering rates, therefore they can't risk anything that might cause a recession, therefore they must not ever raise rates? Once interest rates are lowered close to zero they cannot ever safely be raised? Sounds a little like Zeno's theory that an arrow in flight cannot actually move, because at any instant it is always in one specific place...
http://larrysummers.com/2015/12/15/what ... have-done/
Here are his concluding remarks.
BobKOn balance the risks of raising rates seem a little more likely to play out and much more serious than the risks of standing still on rates. Moreover, given the inevitability of mistakes prudence dictates tilting towards making errors that are reversible. An excessive delay in raising rates can be remedied eight weeks later at the next FOMC meeting by raising them then. On the other hand, if rates are raised and it proves to be a mistake there are likely to be substantial costs as inflation expectations move down, financial turbulence ensues, and the economy possibly tips towards recession. Reversing the rate increase would be unlikely to eliminate these consequences. Moreover, reversing the direction of policy would hardly be helpful for central bank credibility as the central banks around the world who raised rates and then were forced to reverse themselves have discovered.
Reasonable people can come to different judgements on all of this. I think on balance it was a mistake to lock in a December rate increase though the argument is closer than it was in September. But that decision has been made. I hope the Fed will not now invest its credibility in signaling further increases until and unless there is much clearer evidence of accelerating inflation. I hope it will also emphasize the two sided character of the 2 percent inflation target to mitigate the risk that markets will think the US has an inflation ceiling rather than target. Finally, I hope the Fed will signal its awareness of instability and risk of growing problems in emerging markets.