There is really nothing new in Summers's talk. It seems to be either the standard Keynesian narrative on the financial crisis and post-crisis sluggishness in the U.S. economy, or borrowed from Paul Krugman. Here's the basic story. According to Summers, the pre-crisis period was not one of "excessive aggregate demand," but an episode in which asset price bubbles masked underlying secular stagnation. Post-crisis, we're in a state where the "real interest rate consistent with full employment" is very low. In this state, according to Summers,
…We may well need, in the years ahead, to think about how we manage an economy in which the zero nominal interest rate is a chronic and systemic inhibitor of economic activity, holding our economies back, below their potential.
Summers is very good on his feet. If you don't listen too carefully, everything fits together nicely, and he doesn't contradict himself. He knows his audience, and gets a chuckle when he jokes about Minnesota/Chicago (whatever he thinks that means). But what he's actually saying is shallow, and unsupported by serious economic research. Who wants a guy running the Fed who thinks like that?
The standard New Keynesian narrative at the core of Summers's talk is outlined in this post. New Keynesians (NKs) argue that we can model the financial crisis as a preference shock - the rate of time preference fell. The optimal monetary policy response to such a shock in a NK model is for the nominal interest rate to fall to zero (if the shock is large enough). The "natural rate of interest" falls, but the actual real rate falls short of that because the zero lower bound binds, according to the story. The problem for this story in replicating recent U.S. data is that New Keynesian (NK) models revert to trend. Ultimately, as prices and wages adjust, real GDP growth will be determined by exogenous TFP (total factor productivity) growth. As I argued here, it seems implausible to argue that there is enough price and wage rigidity to give us the level of NK inefficiency that some want to argue exists, more than 5 years after the Lehman collapse.
Maybe Summers is thinking the same thing, as what he wants to add to the story is some kind of Alvin Hansen "secular stagnation" mechanism. This seems puzzling, as Hansen predicted in the late 1930s that the economy would stagnate forever, without sustained government spending to support it. Given that the U.S. economy returned to its pre-recession growth trend after the big reduction in government spending following World War II, that idea seems not to have panned out. But Summers wants to somehow connect secular stagnation to the zero lower bound. This is even more puzzling, as it runs into the same problem as in the standard Keynesian narrative. In NK theory, the key problem is that wage and price stickiness misaligns relative prices, including intertemporal prices (i.e. the real interest rate), and if the zero lower bound binds, then monetary policy can't correct the problem. Summers seems to want us to think that we can have permanent relative price distortions - that if monetary policy is hemmed in by the zero lower bound we'll have inefficiency forever. Apparently Summers does not think prices will ever adjust, or he's unaware of some of the simple tax policy solutions that are available, even if we buy into the NK framework.
So, secular stagnation does not seem to be consistent with NK models, as we know them. Maybe Summers has something new in mind. If so, I haven't seen it, and he certainly did not make us aware of any such new work in his talk. That's why this is a bad policy talk, representing only the glib ramblings of a man who hasn't addressed the problem at hand in a serious way.