Getting a recovery from here, from within the mess that Obama has left behind, will be a task of such Herculean difficulty that only because Trump is president do I think it is even possible. And one of the most important virtues he may have is not listening to economists such as this one discussed in the article at the link: The brilliant economist who designed the failed 2009 stimulus plan tells us that Donald Trump’s economic plans are going to fail. Here we are dealing with Harvard economist, i.e. Keynesian economist, Lawrence Summers, about whom the article states:

At this point, we have to note that the esteemed Dr Summers was the architect of President Obama’s 2009 stimulus program, the American Recovery and Reinvestment Act of 2009, an $831 billion boondoggle which was promised to hold unemployment to a maximum of 8%; it reached 10.0% in October of 2009, and stood at 9.2% in June of 2011, when it was projected to be below 7%. There are many economists who still justify the stimulus bill by saying that while the effects of the recession were worse than estimated, they’d have been worse yet without the ARRA. That, of course, is unprovable, but when the designer of such a huge, failed program tells me that someone else’s economic plans won’t work, I have to look at his statements with a jaundiced eye.

Trump has spending plans of his own that aside from The Wall, which if it significantly reduces the size of the American welfare bill may pay for itself many times over, will also add to the burdens on the economy. But he also intends to cut energy costs, improve decaying infrastructure, free up the regulatory framework that suppresses industry, renegotiate trade deals that are intended to work for American industry, and lower government outlays generally. He will also remove Obamacare, which has raised the cost of full-time employees, while lowering the cost of health insurance. Interest rates will also start to rise which should assist in the shifting of resources into more productive areas of the economy, and will also add to the willingness of many to save.

I definitely do not say it’s easy, and no one can guarantee things will turn round rapidly enough to show results soon enough to work politically, specially in the midst of the hostile media circus Trump will have to deal with. But at least I feel the for the most part the changes that will be introduced will generally shift things in the right direction. Here is the alternative Summers has in mind:

I have long been a strong advocate of debt-financed public investment in the context of low interest rates and a decaying U.S. infrastructure, so I was glad to see Trump emphasize it. Unfortunately, the plan presented by his advisers, Peter Navarro and Wilbur Ross, suggests an approach based on tax credits for equity investment and total private-sector participation that will not cover the most important projects, not reach many of the most important investors and involve substantial mis-targeting of public resources.

There is no learning from history other than that economists never learn from history. You also know that Congress is will fight like cats to maintain expenditure since that is almost entirely what they have to maintain their support. Whether there is a constituency for re-building the private sector is still to be discovered, but at least with Trump you know he will want to try.

And if you are curious about the significance of the title to the post, you need to recall Obama’s declarations of a “recovery summer” that never arrived even after eight successive summers of trying.

The most certain certainty that following the election rates would go up, and if Trump won, they would go up sooner and faster. From the oh so non-political Fed:

While there’s growing confidence in a rate hike in December, Yellen may not be able to give the bicameral Joint Economic Committee in Washington many additional details on the more distant path for monetary policy. The future is loaded with more than the usual amount of hypotheticals that could alter the central bank’s economic forecasts and rate-hiking speed.

Federal funds futures markets indicate a 94 percent chance that the Fed will increase rates by 25 basis points at its December meeting. On Tuesday, Fed Governor Daniel Tarullo — who historically has supported maintaining easy policy to help pull workers back into the labor market — said there’s now a stronger case for talking about hiking to avoid overheating, adding his to the chorus of voices signaling that an increase has become more imminent.

But it’s a good thing in the end. Low rates are a killer, but don’t expect most economists to be able to tell you why.

Before we invented Keynesian aggregates economists had a reasonable understanding of how economies work. Seriously, what can you make of this story in today’s Oz: Weak wages knock economy pick-up hopes?

Wage growth has dropped to a ­record low with average increases barely matching the depressed ­inflation rate and casting a shadow over both Reserve Bank and Treasury hopes that household spending will fire the economy over the next year.

The fall in wage growth from 2.3 per cent a year ago to 1.9 per cent in the year to September surprised economists and the ­Reserve Bank, which had argued wage growth had stabilised at a little above 2 per cent and that a gradual pick-up in inflation was likely. . . .

Both the Reserve Bank and Treasury are counting on household consumption to support economic growth over the year ahead, compensating for weak business investment.

The Reserve Bank’s quarterly economic review last week said that would require households to be sufficiently confident about their income growth to cut back on savings.

A couple of points. First, falling real wages are part of the adjustment process that keeps people in jobs and allows businesses to remain viable. It’s a good thing in such difficult times. You wish it were otherwise, but wages adjusting to productivity is what helps keep an economy on course.

Second, the growth in public spending as a proportion of total output means that we cannot grow as fast as we previously had. My favourite example, since it is bi-partisan and therefore shows neither political party gets it, is the NBN. We are ploughing billions into a project that soaks up resources that do not produce a net return. And then there are all the green subsidies and the thousands of other projects that governments subsidise because they cannot earn their keep on their own.

And speaking of green subsidies, since our moron class of politicians think it is wise public policy to close down carbon-based forms of energy, the fact that it is harder for industry to move forward ought to be understood as the direct consequence of such forms of vandalism. If you replace cheap energy with more expensive energy, the economy slows. If they don’t even understand that, how do they think things work?

Laughably, the pressure is now on to lower interest rates to kindle more inflation. This is right out of standard economic theory so why should anyone think it makes sense? You might have hoped that someone would have noticed that lowering rates is not working, not here nor anywhere else. Economic theory is junk science, I’m afraid. But the cutest part of the story is this:

The public sector is doing better than the private sector, with wages up 0.6 per cent in the quarter and 2.3 per cent over the year, compared with the private sector increases of 0.4 per cent in the quarter and an annual 1.9 per cent.

And here we see the diversion of massive amounts of our productivity to the most useless parts of our economic apparatus. I’ve even heard it said that Gillian Triggs takes home $400,000 a year. Public waste is chronic.

UPDATE: Satire can no longer keep up with real life. This is from the comments:

john constantine
#2210724, posted on November 17, 2016 at 12:54 pm (Edit)
Zero interest rates not working only proves that cash needs to be disposed of and all money made electronic, then negative interest rates can be effectively introduced and clinging obsolete savers can be charged rates on the unspent money in their accounts.

If that doesn’t work, then they can charge rates on the unborrowed and unspent balance on your credit card.

And this is from real life just now from Zero Hedge:

Less than a week after India’s surprise move to scrap its highest denomination cash notes, another front in the War on Cash has intensified down under in Australia.

Yesterday, banking giant UBS proposed that eliminating Australia’s $100 and $50 bills would be “good for the economy and good for the banks.”

(How convenient that a bank would propose something that’s good for banks!)

This isn’t the first time that the financial establishment has pushed for a cashless society in Australia (or anywhere else).