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Speaker 1: Welcome back to Bloomberg Markets. I'm Shanali Basseck with Vonnie Quinn,

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Speaker 1: and it's time now for our Wall Street Week daily segment.

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Speaker 1: Former US Treasury Secretary Larry Summers joined Bloomberg's David Weston

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Speaker 1: earlier to take a look back at twenty twenty three

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Speaker 1: and some of the predictions that were made about inflation.

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Speaker 1: Take a listen.

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Speaker 2: We basically got an outcome that was closer to Team

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Speaker 2: Transfertories prediction. Inflation came down with policy. That is what

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Speaker 2: their opponents were insisting on interest rates, far beyond what

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Speaker 2: they were recommending, far beyond what the FED was predicting

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Speaker 2: as of almost any date in the recent past.

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Speaker 3: So the record's a bit ambiguous.

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Speaker 2: Yes, absolutely, there have been important supply elements. I have

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Speaker 2: always stressed that we never were an eight percent or

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Speaker 2: a seven percent inflation country that because of bottlenecks, a

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Speaker 2: variety of prices went up, adding to inflation, and they

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Speaker 2: would then come down subtracting from inflation. I'm not sure

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Speaker 2: we're really a two percent target inflation country in any

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Speaker 2: durable sense. I look, for example, at the five point

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Speaker 2: two percent wage increase the federal.

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Speaker 3: Government just gave at strike activity.

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Speaker 2: It's more than it's been in.

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Speaker 3: A decade, at still tight labor.

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Speaker 2: Markets, at potential geopolitical risks in commodity markets, at the

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Speaker 2: fact that house prices have really started to turn back up,

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Speaker 2: And I'm far from sure where we're.

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Speaker 3: Going to go on inflation.

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Speaker 2: So to declare that proverbial soft landing to have taken

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Speaker 2: place seems to me to be premature. So I think

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Speaker 2: we're still in an ambiguous situation. I've been saying, David

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Speaker 2: on your show for close to a year now that

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Speaker 2: there are three possibilities that the economy turns down quickly,

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Speaker 2: that the economy achieves the proverbial soft landing, and that

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Speaker 2: in a sense, we don't ever achieve a secure landing,

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Speaker 2: and inflation never really gets down to target and even reaccelerates.

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Speaker 3: Obviously, we didn't see the.

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Speaker 2: Hard landing in twenty twenty three. I was never as

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Speaker 2: sure as many people were that that.

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Speaker 3: Would come, because, as you also.

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Speaker 2: Know, I've been arguing that neutral interest rates have gone up,

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Speaker 2: so policies not as contractionary as many people expect, and

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Speaker 2: that the impact of interest rates are lower than many

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Speaker 2: people have expected. So I'm not terribly surprised that we

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Speaker 2: haven't seen a recession in twenty two three, and I

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Speaker 2: think there are risks looking at some of the credit

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Speaker 2: figures for the next while we may achieve that soft landing,

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Speaker 2: I'd certainly say it looks better and more likely that

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Speaker 2: it did six or eight months ago. I always said

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Speaker 2: that soft landings were the triumph of hope over experience,

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Speaker 2: but occasionally hope may triumph over experience.

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Speaker 4: Larry, one of the big developments of twenty twenty three

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Speaker 4: was a generative AI, something you brought to Wall Street

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Speaker 4: Week actually back when chat ept was first announced. As

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Speaker 4: you look at it now and you have a role

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Speaker 4: actually now in open AI. What are the possibilities for

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Speaker 4: generative AI in twenty twenty four. What should we be

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Speaker 4: looking forward to, What, for that matter, should we be

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Speaker 4: concerned about?

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Speaker 3: David, I think this is an immense development. I think

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Speaker 3: that there's a ton of uncertain to.

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Speaker 2: You about what the timing is going to be. I'm

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Speaker 2: not sure that it's going to be quite as revolutionary

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Speaker 2: for productivity as we measure it quite as rapidly as

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Speaker 2: some people hope. But this is you know, people use

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Speaker 2: the term general purpose technology. I can think of almost

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Speaker 2: no area of human activity, almost no area of economic

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Speaker 2: endeavor that is not going to be profoundly affected by

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Speaker 2: these technologies. And I have no doubt that they are

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Speaker 2: going to get substantially better.

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Speaker 3: And here's the thing that I want to am size.

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Speaker 2: At the early stage of the technology, David, people always

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Speaker 2: think about how it can do currently recognize tasks better

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Speaker 2: and more efficiently. But ultimately it's the new tasks of

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Speaker 2: which we have not conceived that is the larger effect

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Speaker 2: of new technologies.

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Speaker 4: And finally, Larry, twenty twenty three was a year of

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Speaker 4: geopolitical strife. We started it with the war in Ukraine

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Speaker 4: continuing we added then the attack of Hamas on Israel

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Speaker 4: and the difficulties that's raised in the Middle East for

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Speaker 4: so many people. We have continued tension with China. As

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Speaker 4: you look at the macroeconomics of twenty twenty four, how

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Speaker 4: did geopolitics fit in.

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Speaker 3: The post Cold War? Holiday from history is over.

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Speaker 2: The world is once again a very dangerous place with

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Speaker 2: the prospect of war between major powers. The way in

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Speaker 2: which the United States has conceived itself in terms of

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Speaker 2: national security is.

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Speaker 3: No longer viable.

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Speaker 2: We are going to have to invest substantially more in

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Speaker 2: all aspects of national security. That ranges from increased defense

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Speaker 2: spending well above current projections, to thinking about national security

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Speaker 2: issues as we think about our educational system as we

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Speaker 2: did after Sputnik, to thinking about our investment in connections

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Speaker 2: all over the world.

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Speaker 3: The idea that we can.

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Speaker 2: Rely on a growing spread of democratic, market oriented economies

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Speaker 2: to usher in a better world is no longer valid,

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Speaker 2: and that makes for a much more uncertain and dangerous world,

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Speaker 2: with the possibility of geopolitics at any moment bearing importantly

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Speaker 2: on markets than many of us have.

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Speaker 3: Become used to.

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Speaker 2: I worry about the possibility of conflict much more than

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Speaker 2: I would have a few years ago. And I think

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Speaker 2: that whether you're a student, a professor at a university,

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Speaker 2: a worker in a business, a leader of a business,

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Speaker 2: I think the idea that we all need to think

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Speaker 2: about our country and its responsibility to keep itself safe

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Speaker 2: and what it does in the world's capacity for the

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Speaker 2: world's safety. I think back now to John Kennedy's inaugural

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Speaker 2: about asking ourselves not what our country can do for us,

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Speaker 2: but what we can do for our country, as again

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Speaker 2: being a kind of theme that our leaders are going

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Speaker 2: to need to strike, and our people in business are

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Speaker 2: going to need to respond to. These are very very

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Speaker 2: serious times, David, in a way that I think many

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Speaker 2: who are alive today and have not really seen or

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Speaker 4: Contemplated Larry Summers, their former US Treasury secretary