Larry Summers has it Half Right

Today on Bloomberg Larry Summers went on a rant about no inflation and the weak global economy.  He then goes on to say that the FED cannot raise rates because of those facts, which are probably true, even though the markets are trying to show he is wrong at the moment with some baby bounces in commodity sectors.

What he and Bernanke, in Bernanke’s current book tour, fail to state, even though they no doubt know it, is that the spread of funny money by the FED was just an attempt to paper over a systemic failure of global economies to target investment into growth producing assets.  The FED now needs to bring a bit of tough love into the picture and see what sectors have value in a 2 percent interest rate environment.  That will give them some wiggle room to reduce rates at a point in the future when they try to unload their four trillion of funny money.

Then we can move into the solid growth period that the Republicans in their debates seem to believe they can divine.