Blog/Armstrong Economics 101
Posted Jan 8, 2017 by Martin Armstrong
QUESTION: Marty; Did you see Larry Summer’s comments on Trump. Is this guy completely insane? He says Trump is proposing things off the planet. Wasn’t it Summers who came up with the negative interest rates and supported repealing Glass Steagal?
ANSWER: Larry Summers is a classic example of how a PHD means absolutely nothing compared to real life experience. He had the audacity to say, “The vast majority of the companies who have large overseas cash also have substantial amounts of domestic cash.” Obviously, Summers has never advised a real company. If Trump makes it a 10% tax, any company who does not bring their cash home would be a short. EBay had two companies it wanted to buy domestically. It backed out of the deal because it would have to bring in cash from overseas and pay too much tax to make it worthwhile. That’s how much Larry Summers knows about the world.
Summers went further, “The reality is that cash that is brought home will be used to pay dividends, to buy back shares, to engage in mergers and acquisitions, to rearrange the financial chessboard, not to invest in large amounts of new capital. It is a chimera to suppose that there will be large increases in capital investment as a consequence of that repatriation.”
First of all, paying dividends and buying back shares will put money DIRECTLY into the hands of investors who will redistribute the funds. Summers tries to “stimulate” by handing banks billions with no strings attached in hopes that they will lend the money to people who want to borrow. Then he wants to impose negative interest rates to punish people for not spending or investing.
Larry Summers has publicly admitted he is incapable of forecasting the economy, so where does he get off saying this nonsense? Quite frankly, those who are watching their pension funds go bankrupt should sue this guy for his non-conventional idea of negative interest rates to “stimulate” the economy. He gave us the 2007-2009 crisis by repealing Glass-Steagall and supporting the bankers, and he set the pension crisis in motion with negative interest rates. Thank God Hillary lost because this clown would be in charge of screwing up the economy even more.