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Larry Summers

Danny Vinik, BI, Larry Summers Gave An Amazing Speech Explaining The Fundamental Economic Problem Of Our Time, here.

“Imagine a situation where natural and equilibrium interest rates have fallen significantly below zero,” Summers said. “Then conventional macroeconomic thinking leaves us in a very serious problem because we all seem to agree that whereas you can keep the federal funds rate at a low level forever, it’s much harder to do extraordinary measures beyond that forever, but the underlying problem may be there forever.”

There are a couple of other ways we could attack this.

— The Fed could allow for greater inflation, and thus incentivizing people to spend now if they’re hoarding money.

— We could also move to a cashless society where all money is electronic. This would make it impossible to hoard cash outside the bank, allowing the Fed to cut interest rates to below zero, spurring people to spend more.

 

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