BUTTING HEADS

Larry Summers, Paul Krugman, and assorted critics respond to Ben Bernanke’s blog

Obsession
Future of Finance
Obsession
Future of Finance

Ben Bernanke is now a blogger, which means the former US Federal Reserve chairman will have to deal with other bloggers.

“Since I’ve spent much of my time disagreeing with many of his primary views I figure I should maintain ramming speed and take this opportunity to welcome him to the blogosphere properly. Let the ramming begin!” wrote asset manager and blogger Cullen Roche, before railing against Bernanke’s justification for keeping interest rates low while he was at the Fed.

He’s not alone. The blogosphere has erupted with takedowns of Bernanke’s opinions with everyone from Paul Krugman to a host of armchair economists and commenters piling on.

The most prominent response came from Larry Summers, the Harvard University professor and former Obama and Clinton administration economist who was considered a potential rival to Bernanke before he was appointed to a second term in 2009.

Bernanke had used his second post to refute a theory espoused by Summers, who contends that perpetually low interest rates have stuck because the US economy is mired in a long period of sluggish economic growth.

Not to be outdone, Summers quickly responded with a blog post of his own:

I would like nothing better than to be wrong as Alvin Hansen was with respect to secular stagnation. It may be that growth will soon take hold in the industrial world and allow interest rates and financial conditions to normalize. If so, those like Ben who judged slow recovery to be a reflection of temporary headwinds and misguided fiscal contractions will be vindicated and fears of secular stagnation will have been misplaced.

But throughout the industrial world the vast majority of the revisions in growth forecasts have been downwards for many years now. So, I continue to urge that it is worth taking seriously the possibility that we face a chronic problem of an excess of desired saving relative to investment.

Read more from Summers here: “On Secular Stagnation: A Response to Bernanke.”

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