Tags: Summers | US | Recovery | economy

Larry Summers: U.S. Recovery Going ‘Ahead of Schedule’

Friday, 11 May 2012 08:26 AM

The U.S. recovery isn't only going as well as it can, it's moving ahead of schedule, says former Treasury Secretary Larry Summers.

The last recession was not due to a correction in the business cycle, which tends to see quick recoveries, but rather, was due to overleveraging and bubbling asset values.

"If you compare what’s happened in this recession with other recessions that have a similar antecedent, we’re actually ahead of schedule on this recession," Summers tells CNBC’s "The Kudlow Report."

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

"It’s really completely misleading to compare a recession like this, caused by collapsing asset values, with the recession like the one we had in 1982 that was policy-caused in an effort to contain inflation."

While the U.S. officially emerged from recession in 2009, growth remains sluggish, unemployment rates high and demand choppy.

Still, recovery is going better than after the Great Depression in the 1930s and Japan's recession of the 1920s, which were similar in nature to the downturn the U.S. experienced at the end of 2007.

“It was caused by overleveraging, excessive asset values, and when those burst — those bubbles burst when the deleveraging takes place, when you have a massive contraction in the private sector’s propensity to spend, then it takes a long time,” Summers says.

Summers also defends the Obama administration's use of fiscal stimulus policies to jolt the economy, as doing nothing would have been a lot worse.

Since the downturn, the Federal Reserve has injected trillions of dollars into the financial system to juice the economy while the White House has spent hundreds of billions of dollars spending to create jobs and fuel more recovery.

Some Fed officials, however, see inflation rising as a result, as even though unemployment rates remain high, if they fall just a little more, consumer prices will shoot up.

"I continue to watch inflation very carefully, and not just because I'm concerned about price stability, but more because it's a guide to how close we are to maximum employment as well," says Minneapolis Fed President Narayana Kocherlakota, according to Reuters.

Kocherlakota adds that he sees inflation running around 2 percent this year, in line with the Fed's target, but creeping above comfort zones next year, rising to 2.3 percent.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

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