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February 06 2014


Larry Summers Asks For Fiscal Prudence, Better Airports

Our February 6 interview with former U.S. Treasury Secretary and big all-around economic thinker of many hats Larry Summers covered a lot of ground. From his fears of a “secular stagnation” to his thoughts on New York City’s troubled J.F.K. International Airport (he finds it embarrassing).

Larry Summers in the WBUR studios. (Jesse Costa / WBUR)

Larry Summers in the WBUR studios. (Jesse Costa / WBUR)

Here are some highlights from our conversation with Summers.


Summers on inequality, entitlement reform, and the deficit:

Larry Summers: If we are able to increase the growth rate of this economy by two tenths of a percent, some people would say it was three tenths, but between two and three tenths of a percent for the next 75 years, that eliminates the entire deficit problem as it is now projected. And I ask you which is a better strategy, a more positive strategy, a more politically attractive strategy, a strategy that will have great other benefits? Doing all the things, tax reform, immigration reform, removal of barriers to private investment, necessary public infrastructure investment, to raise the growth rate by a quarter of a percent a year, or to launch an attack on programs that are giving people thirty thousand dollars a year, thirty five thousand dollars a year at maximum, at maximum. If you get the maximum social security benefit you possibly can get—

Tom Ashbrook: The entitlement reform question?

LS: Social security reform. The largest social security reform you can get. You pay the maximum in every year for your whole life time, it is less than 40,000 dollars a year. And so at a time of rising inequality, making the focus of our national effort to fix our economy be bearing down on social security beneficiaries, I just don’t think is the right approach.

On whether or not he takes any responsibility for the 2008 financial crisis, could the 2008 crisis happen again, did he supporting the deregulationist in Congress in the 1990s, and his thoughts on US Commodity Futures Trading Commission chair Gary Gensler:

LS: I think all of us who served in-who’s been involved one way or another in the financial sector wish that we had foreseen all the things that took place in 2008 and been able to put in place preparations and contingencies that would have dealt more satisfactorily with those problems.

TA: Were they outgrowths of mistakes made by you in the 90s?

LS: I think there is much- I think with respect it is a very complicated tale. A wide variety of regulatory proposals that would have addressed many of the serious problems: putting derivatives on exchanges, doing something about predatorily mortgages, fixing Fannie and Freddie, that I and others put forward during the 1990s were not accepted by the Congress. The Congress at that point was in the thrall of aggressive deregulationists who would only pass legislation in one direction and of one kind—

TA: Weren’t you in their corner?

LS: No I was not in their corner with respect to a variety of proposals that I put forward, particularly with regard to predatorily lending, but also with respect to other issues that were reject. Now I was not someone who was willing to oversimplify the issue into the view that all regulation is good and all reductions in regulations are bad. And so there were measure that I believe were constructive that operated to reduce regulations that weren’t functional.  And I did support those in the 1990s and I don’t believe you can make a case that the regulations whose removals or adjustments I supported were contributors to the 2008 financial crisis in any large way?

TA: The whole derivatives bubble and meltdown?

LS: There were important derivatives issues, but if you look at what was being done before the legislation and after the legislation it is not that the legislation addressed the things that were at the center of those derivatives problems. The derivatives problems, Tom, had to do with what are referred to as credit default swaps. Credit default swaps essentially were in their very infancy at the time when the Clinton Administration left office. The issues in derivivates were things that were entirely different during the time of the Clinton administration. The question is why nothing was done about credit default swamps and their various consequences over the subsequent eight years. That is an important question, but it is not one that should be addressed to those of us who served during the Clinton administration.

TA: Is that fix today? Is that risk fixed today, as we talk today are we still vulnerable to another 2008 kind of meltdown? You talk throughout here about the risk of that returning.

LS: Generals always fight the last war. And there is always a risk that while a number of those particular issues that were pointed up by the 2008 crisis have been address—are there continuing risks of financial instability? Yes. Has the last word been written, on regulation? No. Do we need to address, for example, a shadow banking system that is still very much in the shadows, as far as regulation is concern?

TA: swamps, derivatives…

LS: Absolutely. Are there continuing challenges with respect to derivatives? Yes there certainly are. But I do believe that important progress has been made and I certainly was very pleased to have, looking back, to have been very strongly supportive of the appointment of Gary Gensler at the CFCT and of the various things that he was able to accomplish that I do think make the system safer than they were before.

On the advice he would give to the new Chairman of the Federal Reserve, Janet Yellen:

TA: Janet Yellen stepping into the Fed, you’re not. What’s your one word of advice to her.

LS: Prudence.

TA: Prudence!

LS: Prudence! And I’m sure she’ll bring it.


Larry Summers’s Stagnation Warning

Former Treasury Secretary Larry Summers is warning of deep economic stagnation, or “secular stagnation.” He’ll explain, plus his thoughts on the debt and deficit, income inequality, Bill Gates and more.

Larry Summers (Courtesy Larry Summers)

Larry Summers (Courtesy Larry Summers)


Larry Summers, former U.S.  Treasury Secretary under President Bill Clinton, former director of the White House National Economic Council for President Barack Obama, professor and former President of Harvard University. (@LHSummers)

From Tom’s Reading List

New Yorker: Is Larry Summers Right About “Secular Stagnation”? — “The argument that the economy is currently being held back by inadequate demand isn’t controversial—at least, it shouldn’t be. Since the recovery began, in the summer of 2009, G.D.P. has expanded at an annual rate of just two per cent, which is pretty feeble compared to previous recoveries. This weak growth reflects the decisions, by households and firms, to economize on their expenditures in the wake of a big asset-price bust; at the same time, the government (federal, state, and municipal taken together) has also been trimming budgets and laying people off, after an initial burst of spending during the Obama stimulus. ”

Washington Post: Strategies for Sustainable Growth – “The challenge of secular stagnation, then, is not just to achieve reasonable growth but to do so in a financially sustainable way. There are, essentially, three approaches. The first would emphasize what is seen as the economy’s deep supply-side fundamentals: the skills of the workforce, companies’ capacity for innovation, structural tax reform and ensuring the sustainability of entitlement programs. ”

Wall Street Journal: The Economic Hokum of ‘Secular Stagnation’ — “There are many problems with this neo-secular stagnation hypothesis. First, it implies that there should have been slack economic conditions and high unemployment in the five years before the crisis, even with the very low interest rates—especially in 2003-05—and the lax regulatory policy.”

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December 20 2013


Week In The News: Fed Tapers, NSA Pushback, Billie Jean King To Sochi

A Fed step back, NSA pushback, Billie Jean King will go to the Olympics. Our weekly news roundtable goes behind the headlines.

Federal Reserve Chairman Ben Bernanke listens to a question during a news conference at the Federal Reserve in Washington, Wednesday, Dec. 18, 2013. The Fed will begin to reduce bond purchases by $10 billion in January because of a stronger U.S. job market. (AP)

Federal Reserve Chairman Ben Bernanke listens to a question during a news conference at the Federal Reserve in Washington, Wednesday, Dec. 18, 2013. The Fed will begin to reduce bond purchases by $10 billion in January because of a stronger U.S. job market. (AP)


Diane Brady, senior editor at Bloomberg Businessweek. (@DianeBrady)

Bryan Monroe, Washington editor of opinion and commentary for CNN. (@BryanMonroeCNN)

Jack Beatty, On Point news analyst.

From Tom’s Reading List

The Guardian: NSA goes on 60 Minutes: the definitive facts behind CBS’s flawed report — “Even if NSA doesn’t mean to break the law, the way its data dragnets work in practice incline toward overcollection. During a damage-control conference call in August, an anonymous US intelligence official told reporters that the technical problem bothering Bates in 2011 persists today. The NSA even conceded to Walton in 2009 that ‘from a technical standpoint, there was no single person who had a complete understanding’ of the technical ‘architecture’ of NSA’s phone data collection.”

Bloomberg: Billie Jean King’s Message To Vladimir Putin — “These gestures are first of all important for the countries making them, which like to think they are being consistent about standing up for universal values (even if their own societies only rather recently saw the light on gay rights). They are also important in letting gay men and lesbians inside Russia know they have international support.”

USA Today: Stocks mixed after Fed’s mini-’taper’ – “The Fed said that starting in January, it will reduce its bond-buying program to $75 billion a month from $85 billion. The reductions, or tapering, will be the first step toward winding down a program that has been in place since the 2008 financial crisis.Asian markets were mixed Thursday, although Tokyo’s benchmark Nikkei 225 index soared 1.7% to 15,859.22.”

October 11 2013


Week In The News: Default, Defiance And The Nobel Prize

Shutdown pain. Default fever. Terror raids and Nobel Prizes. Our weekly news roundtable goes behind the headlines.


Major Garrett, White House correspondent for CBS News, correspondent-at-large with The National Journal. (@MajorCBS)

Diane Brady, senior editor at Bloomberg Businessweek. (@DianeBrady)

Jack Beatty, On Point news analyst.

From Tom’s Reading List

National Journal: That Was Then, This Is Now — “To the degree that Obamacare is still part of the GOP’s ad hoc and ever-shifting shutdown strategy, it is prospective—seeking to siphon funds needed to implement the law, repeal it altogether, or equalize exemptions or waivers granted by the Obama administration to employers, unions, and other pleaders. It is a fight against the semi-known and largely feared. And it lacks a full-blown GOP alternative.”

BloombergBusinessweek: Obama Loses Face and Possibly Ground in Asia — “The reality is that Obama could have stayed on top of the congressional standoff and put in a brief but potent appearance at APEC. After making it clear Friday that he wasn’t going to ‘negotiate with a gun held to the head of the American people,’ the president could have immediately boarded Air Force One for a 21-hour flight to Indonesia, stepped off for a few hours to meet key leaders and address the world, then head home to be in Washington by Monday. What better way to prove that the country’s long-term fortunes can’t be subjected to what he considers to be Republican roulette?”

Guardian US: Janet Yellen: tough in her views and tough in her independence – “For Yellen, economics is not a dry subject: it is about real lives, and she believes it is worth risking a little inflation if it results in jobs. She has also analysed single motherhood, denying it is a result of welfare payments and blaming it on a decline in shotgun weddings.”

October 10 2013


Digging Into The Definition Of A Federal Default

Barreling towards default. We’ll go deep on scenarios for the economy.  They’re scary—and the politics. Scary too.



Martin Wolf, chief economics commentator at The Financial Times. (@martinwolf_)

Alan Auerbach, professor of economics and law at the University of California – Berkeley and director of the Burch Center for Tax Policy and Public Finance.

Austan Goolsbee, professor of economics at The University of Chicago’s Booth School of Business, former Chairman of President Barack Obama’s Council of Economic Advisers. (@Austan_Goolsbee)

From Tom’s Reading List

 Washington Post: As debt-limit deadline nears, investors show growing concern about a U.S. default — “Short-term borrowing by the Treasury Department became twice as expensive Tuesday as it had been the day before, one of the most significant signs of alarm in the bond markets since the financial crisis of 2008.The stock market, meanwhile, continued the steady slide that began in mid-September, when Boehner (R-Ohio) embraced a right-wing strategy for using the budget battles to try to dismantle Obama’s signature health-care initiative. The Standard & Poor’s 500-stock index fell 20.67 points to 1,655.45 on Tuesday. The Dow Jones industrial average dropped nearly 160 points to 14,776.53 and has lost nearly 6 percent of its value since hitting a one-year high Sept. 18.”

New York Times: Many in G.O.P. Offer Theory: Default Wouldn’t Be That Bad – “A surprisingly broad section of the Republican Party is convinced that a threat once taken as economic fact may not exist — or at least may not be so serious. Some question the Treasury’s drop-dead deadline of Oct. 17. Some government services might have to be curtailed, they concede. “But I think the real date, candidly, the date that’s highly problematic for our nation, is Nov. 1,” said Senator Bob Corker, Republican of Tennessee. Others say there is no deadline at all — that daily tax receipts would be more than enough to pay off Treasury bonds as they come due.”

Financial Times: America Flirts With Self-Destruction – ”Is the US a functioning democracy? This week legislators decided to shut down a swath of the federal government rather than allow an enacted health law go into operation at the agreed moment. They may go further; if they do not vote to raise the so-called “debt ceiling”, they risk triggering default on US government debt – a fate far worse than the shutdown or fiscal sequestration. If the opposition is prepared to inflict such damage on their own country, the restraint that makes democracy work has gone. Why has this happened? What might be the result? What should the president do?”

August 28 2012


Keith Fitz-Gerald: The Perils of Underestimating Complexity & Mispricing Risk | Peak Prosperity

"If you’re rich you get a bailout. If you’re poor you get a handout. And if you’re middle class you get left out. " That's not a sustainable way to run the system, exclaims investment strategist Keith Fitz-Gerald.A cancer at the core of our current economy is the magical thinking, "no pain, all gain" http://www.peakprosperity.com/podcast/79525/keith-fitz-gerald-perils-underestimating-complexity-mispricing-risk

January 10 2012


Audio: The Fed: Hero, Villain or Both? - Economics - AEI

July 12 2011


James Turk: Gold Is Our Defense Against the Fiat Currency Graveyard - Blogs at Chris Martenson

“The rule of law has basically been thrown out the window. Money printing is the order of the day. And when politicians take control of central banks, which they have done in the United States and they are also doing in Europe, that basically destroys http://www.chrismartenson.com/blog/james-turk-gold-our-defense-against-fiat-currency-graveyard/60423

July 06 2011


Eric Sprott - Paper Markets Are A Joke: Prepare for Bullion Prices to Go Supernova - Blogs at Chris Martenson

"I think that the prices will continue higher. I mean the amount of money printing is unbelievable. I just think you have to take that initial stand in terms of buying it. I use the James Turk analogy: just keep dollar averaging. We have gone up http://www.chrismartenson.com/blog/eric-sprott-paper-markets-are-joke-prepare-bullion-prices-go-supernova/60155

September 02 2010

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