Comparing the U.S. to Japan in the midst of its 1990s lost decade, Larry Summers argued at this weekend’s INET conference at Bretton Woods that the government needs to maintain domestic demand through further spending.
- 58:50 The medicine depends on the disease. It is very different to have the disease which is no one wants to lend you any money anymore and therefore your currency is collapsing, then to have the disease the asset prices in your country are collapsing and people are bringing money back to your country because they think your money is safer there.
- 59:50 The crisis that was much more analogous to the U.S. crisis then the crisis in Thailand, Korea and Indonesia was the crisis that happened in the early 1990s in Japan and, for better or for worse, the American advice, with respect to that crisis, was strongly expansion of fiscal policy and was strongly expansion monetary police. I think that approach is consistent.
- 60:55 The idea that when your currency is in the process of collapsing that somehow printing more of it or selling more financial instruments in it is somehow going to be availing with respect to the currency I thought at the time was somewhat implausible and I think right now is somewhat implausible.
- 60:24 The broad orientation would be that the United States is more like Japan and the broad recommendation is Keynesian expansion.