Larry Summers how to get out of this economy

Here is Larry Summers talking about how we can get out of this economy. The Keynesian approach is to spend more have more confidence and start more lending. Austerity and cutting back has the opposite effect. Without confidence consumers wont spend and since consumer spending is 70 percent of GDP it makes sense to empower them to spend. Lending on the other hand starts more cash infusion into the money stream and generates more jobs because now the labor needs to be engaged into something providing that need.

Larry Summers

Remind you, this is a Keynesian economic view. It has been tried around White house when Larry Summers was an economic adviser to the President last two years. The effectiveness of such an approach is still up in the air. There has never been much confidence in anything let alone the leadership of the President. When there is a general lack of confidence, decision making freezes, when decision making freezes, hiring freezes and the unemployment rates stay high.

Congress on the other hand is stubborn on spending. They have a view if they don’t spend money economy will turn in better. The fact of the matter is that spending needs to be focused on the economy. Spending on wasteful projects, military industrial complex and other resources is not going to help.