White House economic adviser Lawrence Summers rejects the notion advanced by Pimco heavyweights Mohamed El-Erian and Bill Gross of a “new normal” where the United States grows more slowly for years.
“I would be very reluctant to accept the idea that the American economy no longer has the potential to grow rapidly,” Summers said in a speech.
“The American people have not become less capable of entrepreneurship. They have not become less dedicated to hard work, and the productive potential of this economy has not declined.”
The Pimco execs have defined “new normal” as years of 2 percent economic growth marked by limited credit and job availability.
Summers says there has actually been a “substantial return to more normal conditions,” pointing to experts’ forecasts that the economy resumed its expansion last quarter.
The economy shrank 0.7 percent in the second quarter
“We’re looking at a very different economic situation,” he said.
Still, Summers acknowledged the difficulties.
“We’re in no position to rest, no position to declare victory. . . We’ve got a substantial period ahead of us until we get back to a fully satisfactory state for the American economy.”
Others are more worried than Summers, investment guru Jim Rogers for one.
"There's no question the U.S. is vulnerable to hyperinflation down the road or certainly the inflation we saw in the 1970s,” he told CNBC.
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