Breaking the negative feedback loop
June 3, 2012
Commentary by: Lawrence Summers, Charles W. Eliot University Professor and member of the Belfer Center Board of Directors
Topic: Economic policy
“With the past week’s dismal U.S. jobs data, signs of increasing financial strain in Europe, and discouraging news from China, the proposition that the global economy is returning to a path of healthy growth looks highly implausible.
It is more likely that negative feedback loops are again taking over as falling incomes lead to falling confidence, which leads to reduced spending and yet further declines in income. Financial strains hurt the real economy, especially in Europe, and reinforce existing strains. And export-dependent emerging markets suffer as the economies of the industrialized world weaken.”
Summers’ commentary was also printed by the Financial Times on June 4, 2012.