Wonkbook: The Fed is making the same mistakes over and over again -- by Larry Summers

By Lawrence H. Summers As the Federal Reserve meets today and tomorrow, I am increasingly convinced that while they have been making reasonable tactical judgement, their current strategy is ill adapted to the realities of the moment. Exuding soundness is the task of policymakers. Provoking thought is the task of academics. So here are some …   The latest economic and domestic policy from Wonkblog   Getty Images By Lawrence H. Summers As the Federal Reserve meets today and tomorrow, I am increasingly convinced that while they have been making reasonable tactical judgement, their current strategy is ill adapted to the realities of the moment. Exuding soundness is the task of policymakers. Provoking thought is the task of academics. So here are some not-entirely-formed reflections. Japan's essential macroeconomic problem is no longer lack out output growth. Unemployment is low. Relative to its shrinking labor force, output growth is adequate by contemporary standards. Japan's problem is that it seems incapable of achieving 2 percent inflation. This makes it much harder to deal with debt problems and leaves the Japanese with little spare powder if a recession comes. I am reluctantly coming to the conclusion that the United States may be on a slow-motion trajectory toward a Japanese-style chronic low inflationary, or even deflationary, outcome. A corollary of this view is that the current hawkish inclination of the Fed, with its chronic hope and belief that conditions will soon permit interest rate increases, is misguided. The greater danger is of too little, rather than too much, demand. A new Fed paradigm is therefore in order. ADVERTISEMENT   Read the rest on Wonkblog.   Chart of the day A new report from the Justice Departments examines several theories for the increase in homicides in major cities last year. Max Ehrenfreund has more. Top policy tweets "The Federal Reserve's vain hope that an economy that justifies interest rate hikes will somehow return https://t.co/D9ksLDEONG" -- @jeffspross "Hillary Clinton's careful collection of tweaks and prods is no match for the nation's economic challenges. https://t.co/ZEM0dJx8DI" -- @portereduardo "Why we can't ignore the connection between gun violence and domestic violence https://t.co/QZGibOCzf0 " -- @emilycrockett Most Recent Posts from Wonkblog Why terror attacks might not help Trump Pundits and pollsters are saying the massacre in Orlando on Sunday could help Trump at the polls. By Max Ehrenfreund  •  Read more »   Support for assault weapons ban surges following Orlando shooting A poll shows a majority of Americans now want to ban assault rifles. By Christopher Ingraham  •  Read more »   A new federal report discusses an unexpected theory for why murders are rising in U.S. cities Homicides in big cities jumped 17 percent last year. By Max Ehrenfreund  •  Read more »   Poor people pay for parking even when they can’t afford a car It's something to think about next you time you easily find a parking spot. By Emily Badger  •  Read more »   President Obama just said we shouldn’t shame women for having sex And he called himself a feminist By Danielle Paquette  •  Read more »   How drug companies use gifts and internships to buddy up to their most valuable patients The fight for hemophilia patients, who are treated for life, worries some doctors. By Carolyn Y. Johnson  •  Read more »   Larry Summers: The Fed is making the same mistakes over and over again It seems like Groundhog Dag. By Lawrence H. Summers  •  Read more »   For every gun used in self-defense, six more are used to commit a crime Surveys show you're about as likely to use a gun in self-defense as you are to be abducted by aliens. By Christopher Ingraham  •  Read more »   After mass shootings, Republicans make it easier for people to get guns Some politician don't just offer thoughts and prayers after mass shootings. They take action - just in a surprising way. By Kim Soffen  •  Read more »   ADVERTISEMENT   Recommended for you   Federal Insider Federal news and policy update, in your inbox daily. Sign Up »         Share Wonkbook:       Twitter      Facebook Trouble reading? Click here to view in your browser. You received this email because you signed up for a Wonkblog newsletter. For additional free newsletters or to manage your newsletters, click here. We respect your privacy. If you believe that this email has been sent to you in error or you no longer wish to receive email from The Washington Post, click here. Contact us for help. ©2016 The Washington Post, 1301 K St NW, Washington DC 20071