WEBVTT - Former US Treasury Secretary Larry Summers Talks College Protests

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News returned to our very

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<v Speaker 1>special contributor here on wal Street week. He is Larry

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<v Speaker 1>Summers of Harvard, So Larry, welcome back. It's been a

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<v Speaker 1>very consequential week. We of course had the FED chair

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<v Speaker 1>giving a news conference with the decision, We had ecidata,

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<v Speaker 1>and then we had the jobs numbers at the end.

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<v Speaker 1>What do you make it all?

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<v Speaker 2>Look, there's been a lot of movement, but I don't

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<v Speaker 2>know that we're in a fundamentally different place than we

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<v Speaker 2>were at the beginning of the week. We have been

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<v Speaker 2>realizing now for several months that disinflation is not on

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<v Speaker 2>the secure path that the FED had hoped it would

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<v Speaker 2>be a few months ago. That's why the market has

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<v Speaker 2>moved to go from six cuts this year to about

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<v Speaker 2>one cut this year. And that has been a broadly

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<v Speaker 2>appropriate move on the part of the mark And it

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<v Speaker 2>was a blunder, frankly, of the FED to be as

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<v Speaker 2>confident as it was about the prospect of disinflation. If

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<v Speaker 2>you add up this week's numbers, what did you get?

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<v Speaker 2>You got an ECI that was disturbing on the high side,

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<v Speaker 2>suggesting that wage inflation wasn't coming down, that service sector

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<v Speaker 2>inflation wasn't likely to be coming down in the way

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<v Speaker 2>people hoped. You've got a housing number suggesting more housing

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<v Speaker 2>inflation than many people had been expecting in the presence

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<v Speaker 2>of seven percent mortgages, and then you got a relatively

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<v Speaker 2>soft number this morning and some corroborative ism evidence for

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<v Speaker 2>that that reminded everybody that the economy may well not

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<v Speaker 2>be on fire, the inflation may not accelerate. So I

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<v Speaker 2>think you're at the end of it all about where

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<v Speaker 2>you were at the beginning of the week, with a

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<v Speaker 2>sense that the most likely thing is no cut or

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<v Speaker 2>a little bit of cutting this year, that there's some

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<v Speaker 2>risk that sometimes happens the economy will slide off suddenly,

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<v Speaker 2>but probably greater than that risk is the no landing

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<v Speaker 2>kind of scenario where inflation remains robust. So I think

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<v Speaker 2>everybody's going to have to be watching all this data

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<v Speaker 2>very closely, and ironically, the more we learn, it's not

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<v Speaker 2>really true that the more we know in terms of

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<v Speaker 2>the uncertainties about the economy at this point.

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<v Speaker 1>So I suspect that Shairpower would agree with you, we

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<v Speaker 1>need more data. He likes to data. He's the data

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<v Speaker 1>dependent as they say. At the same time, what I

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<v Speaker 1>took away, at least from his news conference this week

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<v Speaker 1>was a little bit different from the no landing possibility.

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<v Speaker 1>It was sort of, we're on the right course. It's

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<v Speaker 1>just going to take us longer to get there. We

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<v Speaker 1>are restrictive in what we're doing, and we will get

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<v Speaker 1>there and we don't need to consider hikes. Is that

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<v Speaker 1>a fair interpretation what he said, and if so, is

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<v Speaker 1>that where he should be.

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<v Speaker 2>He's much more confident the policy is restrictive than is

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<v Speaker 2>warranted in light of the various factors we've talked about

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<v Speaker 2>pushing up the neutral interest rate, in light of good

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<v Speaker 2>reasons to think that spending may be less intrasensitive than

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<v Speaker 2>had previously been supposed, because, for example, higher interest rates

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<v Speaker 2>with all the government's short term debt mean more income

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<v Speaker 2>for people. I think that the Chair is making a

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<v Speaker 2>mistake if he is confident that policy is meaningfully restrictive

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<v Speaker 2>right now. So, yeah, I have never said that I

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<v Speaker 2>expect the next move to be a hike. I just

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<v Speaker 2>think there's more of a possibility that that's going to

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<v Speaker 2>be necessary than I think has been the view at

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<v Speaker 2>the FED, and to some extent has been the view

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<v Speaker 2>in the markets. But I think you're characterizing the chair's

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<v Speaker 2>attitude right. I think if you look at the FED,

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<v Speaker 2>their tendency going back quite far, most notably in twenty

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<v Speaker 2>twenty one, has been to take strong views when the

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<v Speaker 2>data run against those strong views, to retreat less rapidly

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<v Speaker 2>than they should from the strong views that they have taken.

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<v Speaker 2>And I think we're seeing another example of that on

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<v Speaker 2>the question of whether monetary policy is significantly restrictive. We

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<v Speaker 2>don't know. It could turn out to be, but we

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<v Speaker 2>don't have a basis for confidence that it is.

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<v Speaker 1>As Hilari. Besides the data, the wealth of data that

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<v Speaker 1>came in. A big topic in the news this week

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<v Speaker 1>was the Japanese yen and what's going on exactly the yen,

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<v Speaker 1>whether the government there is intervening or not intervening to

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<v Speaker 1>sort of support the end when it went up to

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<v Speaker 1>one sixty. Actually, you have some experience with intervention and currencies.

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<v Speaker 1>Give us where you think we are right now. And

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<v Speaker 1>of course this is related to the FED because part

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<v Speaker 1>of the issue is if the FED stays higher for longer,

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<v Speaker 1>it supports the strength of the US dollar.

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<v Speaker 2>Given the massive size of the capital markets. I think

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<v Speaker 2>the evidence is reasonably clear that intervention doesn't work, even

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<v Speaker 2>in the scales that the Japanese engaged in. It's just

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<v Speaker 2>overwhelmed by the broad magnitude of private sector capital flows.

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<v Speaker 2>That said, nations tend to intervene when currencies have gotten

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<v Speaker 2>very far from normal levels, and when they've gotten very

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<v Speaker 2>far from normal levels, they sometimes bounce back. So I

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<v Speaker 2>wouldn't want to confidently presume that the end will devalue

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<v Speaker 2>further from here. It could go either way. But even

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<v Speaker 2>if the end does appreciate, I'm going to attribute that

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<v Speaker 2>much more to snapback, then I'm going to attribute it

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<v Speaker 2>to the efficacy of intervention. But I think this points

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<v Speaker 2>up an important issue, which is that the dollar is

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<v Speaker 2>extremely strong right now. That's been a factor that's contributed

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<v Speaker 2>to our relatively favorable inflation performance.

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<v Speaker 1>Larry, I'm sad to say that the disputes on college

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<v Speaker 1>campuses growing out of the Israeli Gods' situation have continued

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<v Speaker 1>some ways have gotten worse. Actually, this week we saw

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<v Speaker 1>police going in various places here in New York at Columbia,

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<v Speaker 1>but across the country. You've been outspoken in the past

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<v Speaker 1>on this issue as a former college president, yourself at

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<v Speaker 1>Harvard and is now a scholar at Harvard. What do

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<v Speaker 1>you think is going on? And more important, perhaps what

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<v Speaker 1>should the colleges be doing? What should the leadership be doing?

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<v Speaker 2>Right now? This is very depressing and worrisome to me.

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<v Speaker 2>As I've said on your show before, David, I think

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<v Speaker 2>the United States is in the most dangerous geopolitical moment

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<v Speaker 2>we've been in probably two generations, given what's happening in China, Russia, Raan,

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<v Speaker 2>North Korea, and so forth. And it seems to me

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<v Speaker 2>that anybody sitting in one of those countries has to

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<v Speaker 2>be taking great encouragement from the spectacle that is being

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<v Speaker 2>made by our young future elits on so many of

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<v Speaker 2>our leading college camps, and even more by the craven

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<v Speaker 2>responses that are typifying university leaderships. I have not been

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<v Speaker 2>as appalled by Harvard ever, as I am by the

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<v Speaker 2>fact that a cathia has rested over the John Harvard

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<v Speaker 2>statue and a Palestenian flag has been placed in the

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<v Speaker 2>hand of John Harvard, that iconic statue on the Harvard campus.

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<v Speaker 2>And you can debate whether administrators should be sending in police,

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<v Speaker 2>and I think that should always be a last resort,

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<v Speaker 2>but that they can't keep John Harvard unadorned with hamas

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<v Speaker 2>supporting symbols. That just is appalling to me. I don't

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<v Speaker 2>think there's any question that as a double standard throughout

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<v Speaker 2>the Ivy League and elite higher education on anti Semitism

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<v Speaker 2>and other forms of prejudice. The lawsuits are largely correct

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<v Speaker 2>in making that suggestion, and I think this is a

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<v Speaker 2>failure of a fundamental part of education, the imbuing people

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<v Speaker 2>with an ability to contemplate serious moral issues in serious ways.

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<v Speaker 2>There is idealism among some of those protesting, though some

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<v Speaker 2>of them are being driven by outside agitation and outside funding.

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<v Speaker 2>And I respect the idealism of those who live by

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<v Speaker 2>a theory of civil disobedience and are prepared for their

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<v Speaker 2>cause to accept punishment. But when I see spectacles like

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<v Speaker 2>the law review of Columbia University demanding that exams be

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<v Speaker 2>canceled or grading be stopped this year because of what

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<v Speaker 2>happened on that campus, I think that bespeaks a kind

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<v Speaker 2>of decadence that causes me to be very worried about

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<v Speaker 2>the future of our universities and about the future therefore

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<v Speaker 2>of our country. I wish we could find ways of

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<v Speaker 2>getting things back on track.

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<v Speaker 1>Larry, thank you so very much for being with us

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<v Speaker 1>as Larry Summer is our special contributor here on Wall

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<v Speaker 1>Street week