Larry Summers: How the Fed screwed up; What a Trump win would do to the economy | E1024

1. 0:00 – 0:36

   Intro

   1. LSLarry Summers0:00

      If you want to get out of the dollar, you have to get into some other currency. And there's a lot that's problematic about, uh, other currencies. It's a joke, but not without some element of truth, to say that Europe's a museum, Japan's a nursing home, China is a jail, and Bitcoin's an experiment. So I think the dollar has a lot of the kind of advantages that the English language has. It's right now kind

2. 0:36 – 3:27

   Larry’s Family

   1. LSLarry Summers0:36

      of where everybody else is, and so that makes it where everybody wants to be.

   2. HSHarry Stebbings0:43

      Larry, I am so excited for this. Thank you so much for joining me, first off.

   3. LSLarry Summers0:48

      Glad to be with you.

   4. HSHarry Stebbings0:49

      Now, I would love to start, I think parents shape us in the most unique and wonderful ways. Your parents, your mother's an economist, father an economist. How did your parents shape you, do you think, Larry?

   5. LSLarry Summers1:01

      I think I came to believe in thinking analytically and thinking rationally about social phenomena. And so from a young age, I was used to asking economists-like questions. Uh, "What about getting one more of those?" Marginal, uh, marginal analysis. "How do costs compare with, uh, benefits?" And so thinking analytically about, uh, why houses were built the way they were, all those kinds of questions were parts of, uh, my childhood.

   6. HSHarry Stebbings1:43

      I have to ask. We, we just mentioned, you know, your being a father and your son. Did that impact how you brought up your son? And being a father yourself, in terms of the conversations you have around the dinner table?

   7. LSLarry Summers1:55

      Yeah, it was a part of, uh, my kids', uh, upbringing. Sometimes it worked better, sometimes it worked, uh, worse. When my daughter Ruthie was four or five, I, um, needed to get a taxi, and a taxi didn't come to my house when I wanted it. And I said, "Damn it, that's what you get with a monopoly cab company." And Ruthie said, "What's a monopoly, Daddy?" And I said, "Well, it's when there's no competition." And she didn't understand, and so I wanted to explain it to her. So I said, "Ruthie, what would you do if you went to a toy store and they didn't have the toy you wanted and they were really mean to you?" And I was hoping for the answer, "Well, I'd go to a different toy store," so I could explain to her about competition. But in fact she said, "Well, then I'd steal their toys."

   8. HSHarry Stebbings2:55

      (laughs)

   9. LSLarry Summers2:55

      And, um, maybe Ruthie learned something out of that whole conversation, but I sort of learned something about how people react to market mechanisms.

   10. HSHarry Stebbings3:06

       You learned that there's no such thing as a, a lack of creativity in children. (laughs)

   11. LSLarry Summers3:11

       Something like that. I learned something about how people react when the market makes them unhappy.

   12. HSHarry Stebbings3:17

       I love that. Um, listen, I'm a big believer in Charlie Munger's statement, which is obviously, "Show me the incentive and I'll show you the outcome." You, you've had many a discussion, I've listened to

3. 3:27 – 7:31

   What the Fed could have done better

   1. HSHarry Stebbings3:27

      many on recent runs on inflation, and I really wanted to start, honestly, Larry, with the question of, do you believe that inflation targeting is fit for purpose as the main focus of central bank policy today?

   2. LSLarry Summers3:42

      I think the main problems have been bad use of inflation, uh, targeting and misjudgments about how the economy was functioning rather than, uh, the fr- the broad, uh, framework. I think some of the things the Fed did in terms of its so-called flexible average inflation targeting framework were not what I would have advised. But I think the much bigger problem was hopeful diagnosis and assessment rather than realistic diagnosis and assessment.

   3. HSHarry Stebbings4:25

      There's so many things for me to unpack there. Number one, when you say about kind of bad, uh, inflation targeting, what makes good versus bad inflation targeting? Giving, given the transient nature of the future, is it not fundamentally the most challenging thing to do well?

   4. LSLarry Summers4:42

      Yeah, it's very hard to do well, but what you have to do is form a realistic assessment of the economic forecast. And my view in 2021 was when we had massive budget deficits, 14% of GDP, when they were saying they were gonna keep interest rates at zero for three, four years, and when they were buying up every bond in sight, it was kind of predictable that that would all be inflationary. But they wanted to do it. They were still fighting the last, uh, war, and they convinced themselves as contrary evidence developed that it was all temporary, transient stuff rather than being willing to be realistic about uncongenial belief. I think a very important attribute as a policymaker is you have to not get confused about what you want and what is. And I think the Fed got itself convinced that things were much more under control than they in fact were.

   5. HSHarry Stebbings5:56

      What you want versus what is. I love that. If it's what is, what would you have done?

   6. LSLarry Summers6:04

      I would have recognized that a situation of very substantially excess demand was developing. I would've moved to signal my awareness of that and to start putting my foot on the brakes much sooner than they did. And certainly, as inflation was rising, as we were having a record inflation bubble, I would not have been, um, putting my foot hard on the accelerator by buying up mortgages in large quantity as the housing market was bubbling over.

   7. HSHarry Stebbings6:49

      Now, I heard you on a recent podcast, and you said a fascinating stat that about 30% of the stimulus packages had actually been spent, meaning 70% was actually still in kind of consumer wallets. To what extent is that gonna be shown in the subsequent quarters' inflation numbers, the 70% remaining?

   8. LSLarry Summers7:09

      I think the reason we had s- ... The stimulus was largely delivered in 2021.

   9. HSHarry Stebbings7:16

      Mm-hmm.

   10. LSLarry Summers7:17

       And part of the reason why inflation accelerated through much of 2022 was that it was still being spent in 2022, and some of it is still gonna be spent

4. 7:31 – 11:30

   Can we increase interest rates without breaking the economy?

   1. LSLarry Summers7:31

      in 2023. And that's part of why the economy has seemed so strong even as interest rates have gone up very substantial.

   2. HSHarry Stebbings7:45

      Can we increase interest rates at the level we need to without tanking the economy, Larry?

   3. LSLarry Summers7:53

      I think that when you need to brake the car and the car is going very fast, it may well be that you can't bring it down to a stop or to sustainable speed without some real skidding and risk of accident. And I think we have worked our way into a position like that where my own view, and I've said this, uh, many times is that what Samuel Johnson said about second marriage is true about soft landings. They represent the triumph of hope over experience. And I don't think we're likely to be able to bring inflation down to its target level without some kind of, uh, economic downturn. That doesn't mean I want an economic downturn. It doesn't mean the goal of policy should be to have an economic downturn, but it means to recognize reality. Sometimes a medicine that's necessary has unpleasant side effects. That doesn't mean the doctor who prescribes it wants to hurt you, but the doctor who prescribes it recognizes that if you don't take it and you defer taking it, there's even gonna be more pain and problem later. And I think the Fed was much too slow to make the necessary prescription, and therefore the economic disruption is going to be greater than it needed to be.

   4. HSHarry Stebbings9:45

      If we think about, like, Volcker taking rates to 19, 20%, is there any incentive for the Fed or anyone else to raise interest rates to such a level which would cause such economic harm in, in the short term? Is there any in- incentive to, really, for them?

   5. LSLarry Summers10:01

      We're gonna have to raise interest rates higher than we would have if we raised them more promptly.

   6. HSHarry Stebbings10:08

      Mm-hmm.

   7. LSLarry Summers10:08

      And if we delay excessively, we will have to raise them even higher as a consequence of that delay. There's nothing in the current situation that says to me that, um, we need to get rates anywhere near where Volcker, uh, took them. But if we were to neglect this problem for long enough, and it was neglected for a decade during the '70s, we might get to, uh, such a, uh, such a point. But I think an important part, Henry, of the reason we have independent central banks and we don't have the political process make the monetary policy decision is because we need it to be taken with a view to the long run. In the short run, it's always easier to print more money and paper over problems, but when you keep doing that, you get into (computer dings) more and more trouble as people come to anticipate that inflation. And ultimately, it's like being on a treadmill. You have to go faster and faster

5. 11:30 – 27:28

   How can the US pay off it’s $34T debt?

   1. LSLarry Summers11:30

      and print more money, but you're not really getting any benefit from it. You're just, um, doing what's necessary given people's, uh, expectation.

   2. HSHarry Stebbings11:42

      Speaking of being on that treadmill, a blunt question, Larry, and forgive me for it, what's the path out of the US indebtedness? It feels like the treadmill that we can't get off. What's the path out of US indebtedness? At the next fiscal cliff, I think there's four- 34 trillion of debt and growing. How do you think about that?

   3. LSLarry Summers12:03

      Well, first of all, I think we need to put it in perspective. A growing company can have a permanently growing debt.

   4. HSHarry Stebbings12:13

      Hmm.

   5. LSLarry Summers12:13

      ... a growing economy can have a permanently growing, uh, government, uh, debt. A company probably wouldn't think about its debt by comparing its, uh, debt, uh, to its earnings. It would probably be much more likely to compare its debt service to its cashflow, or to compare its debt to its... to the market value of its equity.

   6. HSHarry Stebbings12:47

      Hmm.

   7. LSLarry Summers12:47

      And if you look at the US debt right now, well, the debt ratio is very high. The debt service ratio is much less exorbitant. And if you look at the ratio of debt to the present value of all our tax collections, that's also lower. And so, I think that one needs to keep the problem in some perspective. But ultimately, we are on an unsustainable path. And my view is that we're gonna have to raise revenues quite substantially, because I don't think there's gonna be a lot of scope for cutting spending, given the way in which our population is aging, given the way the price of healthcare rises to other things, given that interest rates are more likely to go up than down, given that our national security needs are likely increasing. So, I think as a country, we're gonna have to find ways to, uh, increase, uh, revenue collections. And of course, that's never easy for the political process to accept.

   8. HSHarry Stebbings14:05

      It, it's not, and you do that in the form of taxes. And I mean, you perfectly teed me up, Larry, 'cause that was my question, which is, why do the IMF and governments still stick with conventional fiscal rules that constrain public sector growth, enhancing spending?

   9. LSLarry Summers14:24

      Well, I'm not sure what the rules you quite have in mind are. But I do think that it's appropriate to pay attention to the growth of debt. Uh, as I said, some growth of debt can be okay, but debt that is growing faster than income, when income's at a... doing its best, that's likely to be, uh, problematic. And I think that the need is gonna be to find more revenue in the United States. I think there's some good ways to, uh, to do that. But I certainly don't think we should be putting any arbitrary ceiling on the level of government spending, given the magnitude of both national security needs in our country and social needs in our country.

   10. HSHarry Stebbings15:17

       Larry, what would you do to find more revenue? The Holy Grail question. (laughs)

   11. LSLarry Summers15:22

       So, the first thing I would do is enforce the tax law we have much better. We have a gap between taxes that are owed, that everybody agrees are owed under the current law, and taxes actually collected, that will total $8 trillion over the next 10 years. $8 trillion. And that's because we don't collect, we don't audit, uh, the vast majority of even the wealthiest, uh, people. And so, many of them just cheat. Uh, not most of them, not even... I shouldn't have said many. I should have said, um, a small number of them cheat. But it adds up to a lot of money, and we could deter that if we went back to auditing people, even at the rate that we did a decade ago. Um, and we have stopped, uh, doing, uh, doing that. So, we need to beef up the IRS very substantially so it can collect taxes that are owed. Because-

   12. HSHarry Stebbings16:33

       Can I, does that, does that really make that much of a difference, Larry? Forgive me. 'Cause in proportion to the spending and the needs, taxing your in- individuals who are evading, does it make a difference?

   13. LSLarry Summers16:45

       $1 trillion here or $1 trillion there, pretty soon you're talking real money. And we could raise between half a trillion dollars and a trillion dollars, uh, that way. The business community was right to be very concerned that the corporate tax rate was too high a few years ago. But there was no need to take the corporate tax rate down to 21%. 25% would give very substantial incentives for business. And the United States stands out right now for rejecting a global agreement that would have made it much more difficult for corporations to put their income in the Cayman Islands or Ireland, and therefore, essentially completely avoid, uh, taxation. So, we need global tax cooperation and reasonable, uh, corporate tax rates. There are also things that are, frankly, uh, loopholes. I, I suspect many of the people who listen to your show, um, take adv-

   14. HSHarry Stebbings18:03

       They join those loopholes. (laughs)

   15. LSLarry Summers18:06

       ... uh, uh, the advantage of carried interests, they engage in real estate exchanges, so-called like-kind real estate exchanges. You know, when carried interest is... gets capital gains tax treatment-... even though it's compensation for working, really. If I sell a stock and buy a different stock, I have to pay capital gains tax on the stock I sell. If Donald Trump sells a property and ex- and exchanges that property for another property, he doesn't have to pay any capital gains tax. And that's not a reasonable, uh, tax provision. There are a variety of tax shelters where basically they make it possible for people who, um, earn their living by trading assets to pay much lower taxes than people who earn their living by making things or providing services. And if we fix that, we could also generate, uh, substantial revenue.

   16. HSHarry Stebbings19:25

       C- can I ask you, Larry, ch- should carried interest be taxed as income tax? Is that what you're saying is the solution?

   17. LSLarry Summers19:32

       Yeah, of course it sh- of course it should. Um, and you know it, and I know it would probably be costly for you since you have a, uh, a fund, and the more successful your fund was, the more costly it would be for you. And I participate in funds, so I'm a beneficiary as, uh, as well. But it's wrong. Uh, there's no real reason why the fact that we're paid a bonus based on our performance should be a reason why our incomes should be taxed at a lower rate than those of the people who clean the floors in the buildings that we work in. You know that.

   18. HSHarry Stebbings20:28

       (laughs) You're putting me on the spot on my own show, Larry. (laughs)

   19. LSLarry Summers20:33

       (laughs)

   20. HSHarry Stebbings20:33

       My, my point to you is, uh, v- very ... Well, I, I actually feel a little bit, um ... I, I think we should have a base rate of tax, I'm gonna go out there. I don't think the progressive tax system works. I think it disincentivizes people to work hard. I work my ass off, I have heart palpitations, I have psoriasis, I've, uh, developed an addiction to alcohol. Man, I've given my life for this and I don't work 35 hours a week or 40 hours a week. I work 90, 100, and I have done for eight years, and now I get taxed 50% while my brother works half time and gets taxed 20%? That doesn't seem fair.

   21. LSLarry Summers21:13

       So first of all, you're... Let's make sure we understand each other. Your brother gets taxed 50... Gets taxed at a lower rate on, say, the first $100,000 of income he earns.

   22. HSHarry Stebbings21:29

       Mm-hmm.

   23. LSLarry Summers21:30

       I also get taxed at a lower rate on the first $100,000 of income that you earn. The only difference is that you seem to earn a lot more money than your brother, and on the extra money that you earn, you are paying a higher fraction of it, uh, to, uh, the, the government. And I guess I would ask you, does a marginal dollar mean more to somebody who has $10 million or to somebody who has $10,000? And my guess is it means more to somebody who has $10,000. And so if we have to take some away, it's better to take some away from those who are less painful. And I will tell you that this is something that economists have studied a lot. I've had a lot of contact with a lot of entrepreneurs. And yes, the way the United States was in the 1950s and '60s with 90% tax rates, crazy. The way the United States was in the mid-'60s and '70s, 70% tax rates, crazy. But do I think that the current top federal income tax rate of 37% really is working to discourage very heavily, um, work? I'm not sure that it is for very many people. Some people may actually work harder because they want to get to a certain level. And if taxes are higher, they have to work more, uh, to get to that level. One other thing, the biggest tax we have in the United States, the tax that collects more tax than the income tax, the payroll tax, you don't pay any payroll tax if your income is above $150,000 on all the income above $150,000. And yet people pay that 8% tax and their employers pay that 8% tax up to $150,000. So look, we've got to make, uh, tough choices. Who makes- Who gets the best advantage out of the fact that our country is well defended? Who gets the greatest advantage out of all the fruits of our national labs? I think it's people who are more fortunate, um, like you and me.

   24. HSHarry Stebbings24:24

       ... regardless of like whether it's fair or not, a question I have is like, is it realistic, Larry? Because like you said very accurately, a lot of our audience do take advantage of the benefits of moving abroad, moving to Lisbon, moving to Milan or Italy now where they have great tax treatment. Is it even realistic when you can move and avoid taxes, bluntly?

   25. LSLarry Summers24:48

       If you, uh, if you're an American citizen, you cannot avoid taxes by moving.

   26. HSHarry Stebbings24:56

       Mm-hmm.

   27. LSLarry Summers24:56

       You're taxed on your global income, wherever you are, if you are an American citizen. You can renounce your American citizenship, and there are a certain number of economic Benedict Arnolds who, uh, do just, uh, who do just that. But most people don't want to renounce their American citizenship because it comes with a great deal of, uh, benefit. So I don't think it is impractical. If you look, the economy grew faster during the period several decades ago when we had higher tax rates than it has grown, uh, more recently. So, I think the argument for cutting high tax rates is pretty much, uh, indefensible starting from where we are. Now look, I am not someone who believes we should have a wealth tax. I am not someone who believes we should soak the rich. I am somebody who believes in creating opportunity rather than going to war with inequality, because I think if we had more entrepreneurs, more multi-billionaires like Steve Jobs or Bill Gates, that we would be a better country. But to suggest that somehow we can't impose taxes at current levels, that we can't reform the estate tax to make the estate tax something that people pay rather than they're largely successful in, uh, avoiding, I think that's, uh, to be honest, kind of demagogic and contradicted by all the evidence, uh, that we have. Now true, it's much easier for the federal government to do this than it is for an individual state to do this, because if a state does it, if California does it, people will move to Nevada. If New York does it, people will move to Florida. But at the federal level, I don't have any doubt at all that we could maintain the

6. 27:28 – 29:25

   Will the US Dollar lose reserve currency status?

   1. LSLarry Summers27:28

      current level of taxes and that we could actually raise more revenues.

   2. HSHarry Stebbings27:33

      You said about renouncing your US citizenship there, and it made me think about kind of actually the, the US dollar itself as the reserve currency, interesting mind I have. How do you think about the demise of the US dollar as the reserve currency stay, and do you think people are getting ahead of themselves in their negativity and pessimism?

   3. LSLarry Summers27:52

      I think they are. Um, I think first of all, if you look at the history of when other countries have lost their reserve currency status, like Britain, it's the least of their problems. Britain lost the pound's special role after it stopped being a superpower and stopped being an effectively functional economy. So, we may make serious enough mistakes as a country that people no longer want to hold the dollar, but if we make mistakes that grave, the fact that people aren't rushing for dollars will be the least of our problems. I also think that if you want to get out of the dollar, you have to get into some other currency, and there's a lot that's problematic, um, about, uh, other currencies. It's a joke, but not without some element of truth, to say that Europe's a museum, Japan's a nursing home, China's a jail, and Bitcoin's an experiment. And so I think the dollar has a lot of the kind of advantages that the English language has. It's right now kind of where everybody else is, and so that makes it where everybody wants to be. So if we don't make grave mistakes, I think the dollar's gonna remain the world's reserve currency.

7. 29:25 – 32:53

   Why European Companies Struggle Compared to the US

   1. LSLarry Summers29:25

   2. HSHarry Stebbings29:25

      How do you think about the next five years for Europe, Larry? I'm fascinated. You said about it there as a museum, (laughs) uh, probably a very beautiful museum, um, but how do you think about the next five years for Europe? I'm fascinated.

   3. LSLarry Summers29:39

      Look, I think Europe's challenge is to catch the waves of innovation. You think about entrepreneurship, if you think about great companies that have been created in the last, uh, 25 years, Europe has not been a creator, uh, and scaler of great enterprises. If one thinks about the whole information technology wave, one thinks about American companies, one thinks about Chinese companies, one thinks about Is- Israeli, uh, companies, one... There are European companies that you can think of-... but not very many, and not in proportion to, uh, the scale of, uh, the European economy. And I don't know what part of that is a reflection of the way the financial system is structured with a lot of emphasis on large, relatively bureaucratic banks. I don't know how much of that is a culture in the educational system that disproportionately focuses away from science and math, uh, subjects, and that tends to be disciplined and to discourage iconoclasm. I don't know what the roots of it are. I don't know whether it has to do with regulation that makes fluidity and flexibility very difficult. You know, no one would check into a hotel if they thought they might not be allowed to check out. And people are very reluctant to hire other people when they think they won't be able to fire them if it doesn't, uh, work, if it doesn't work out. And so, I think there's a lot of rigidity. Some of it comes from regulation. Some of it comes from, uh, culture that means that, at least for the last generation, or probably more than a generation, the Zuckerbergs and the Bezoses and, uh, the Ma, and the Jack Mas have tended to not be European. And I think that has a very broad and substantial impact on, uh, European, uh, economies.

   4. HSHarry Stebbings32:45

      I agree, and I think it's compounded by our recent regulation on AI, which has meant that, you know, for the EU countries, it's

8. 32:53 – 36:52

   Why The Next 5 Years Will Be Difficult for China

   1. HSHarry Stebbings32:53

      practically impossible to use large language models efficiently (laughs) , um, which is why Brexit may have been a better thing for the UK (laughs) . Um, fi- final one before we do a quick fire, but we mentioned Jack Ma, we mentioned China there. I'm just fascinated. When you analyze the next five years for China, Xi Jinping has got, you know, a lot on his plate. How do you analyze the next five years for China? And given what we said there about, you know, the challenges for Europe, how do you think about them?

   2. LSLarry Summers33:17

      It'll be a difficult five years for China. Uh, look, uh, what makes, what makes GDP, what makes an economy, it's people and it's capital. China has more desire for capital flight than any country ever has in the history of the world. It's controlled, but if it wasn't controlled, there would be staggering capital flight from China. And the number of babies born in China has fallen by just about half in the last six years. And so if you're thinking about a society where people don't want to have children, and they'll want to take their capital out, that's a judge, that's a society with a broad swath of the society is showing a lack of confidence. And if a country's own people aren't confident, I'm not sure why I should be.

   3. HSHarry Stebbings34:21

      Can I ask you a weird one, Larry? Are you confident... Like, I agree with you on, on all. Are you confident about any nation? Or which nation are you most confident about (laughs) ?

   4. LSLarry Summers34:33

      I'm not confident about any place, and I've always thought that Andy Grove said something very wise when he said that only the paranoid survive. But I am ultimately, ultimately really quite optimistic about the United States.

   5. HSHarry Stebbings34:57

      Hmm. Okay.

   6. LSLarry Summers34:58

      I'm very mindful of Donald Trump. I'm very mindful of depths of, uh, despair. I'm very mindful of paralysis in, uh, Washington. And yet, I think the lesson of American history is that America has this extraordinary capacity for self-denying prophecy. When Jimmy Carter declared a crisis of the national spirit, when people felt that America was ungovernable after three presidential assassinations and Watergate in the early 1970s, when vast majority of the American establishment told Franklin Roosevelt in 1932 that he needed to take on dictatorial powers. In fact, when Patrick Henry, the man who said, "Give me liberty or give me death," said in 1792 that the spirit of the American Revolution had already been lost. Those predictions, those worries, those alarms set in motion the changes that have made America such a resilient society. And I believe that that capacity for alarm doing the work of reason, um, and reflection, and ultimately renewal...... gives me an ultimate sense of optimism about the United States. Winston Churchill did not say it, although it's often

9. 36:52 – 39:48

   How a Trump Win Would Hurt the Economy

   1. LSLarry Summers36:52

      attributed to him. The United States always does the right thing, but only after exhausting all the alternatives.

   2. HSHarry Stebbings37:03

      Uh, one final one, I promise, and then, uh, is Trump better than Biden? Would he place us in a better economic situation or worse than Biden? And I'm not asking who you want to win or who you don't, but just would he make, economically, the US stronger or weaker?

   3. LSLarry Summers37:20

      It- I, I, I believe very strongly that by undermining the rule of law on which contracts, exchange, and property depend, by alienating the rest of, uh, the world, and by pitting some groups of Americans against other groups of, uh, Americans, and devaluing the idea of unity and common aspiration, that a second Trump administration would do grave damage to the American economy for a sustained, uh, period. And I say that as someone who has been a member of the Democratic party but has always resisted in the past the tendency to become hyper-alarmed about the policies of, uh, the Republican Party. I fear that Trump represents a different and dangerous possible dimension in American politics. Perhaps the model would be Juan Peron in Argentina, with a strong emphasis on the soil, a strong nationalist inward, uh, turn. And what he set in motion has had catastrophic consequences for Argentina for many decades now. You know, after World War II, people expected that there were a set of natural resource countries that were likely to be quite successful. On the list was New Jer- New Zealand, Australia, Canada, and Argentina. And one of those nations stands out for having failed over the last 75 years,

10. 39:48 – 47:05

    Quick-Fire Round

    1. LSLarry Summers39:48

       and it's because of a set of ideas and approaches very much like those that I fear a second Trump administration would break.

    2. HSHarry Stebbings40:02

       Larry, I would love to do a quick fire. So, I say a short statement, you give me your immediate thoughts, and then I will let you roll. Does that sound okay?

    3. LSLarry Summers40:11

       Good.

    4. HSHarry Stebbings40:13

       What are the chances Trump does get in?

    5. LSLarry Summers40:15

       Low, but not zero.

    6. HSHarry Stebbings40:17

       What have you changed your mind on in the last 12 months, Larry?

    7. LSLarry Summers40:22

       The potential importance of AI in, uh, changing the way in whi- uh, the way in which, uh, we all, uh, live as a consequential, uh, challenge that all of us need to be thinking about.

    8. HSHarry Stebbings40:46

       Will AI produce higher returns to labor or capital?

    9. LSLarry Summers40:51

       Ultimately, uh, both, because it will make us, uh, more productive.

    10. HSHarry Stebbings40:58

        What do you know to be true that others highly doubt?

    11. LSLarry Summers41:03

        That there are laws and regularities in economics and social science just like there are in physical or biological, uh, science. It cannot be suspended for, uh, political convenience. If you print too much money, you will have too much inflation. If you control prices, you will have black, black markets and, uh, corruption. There are real economic laws which those who design policy have to respect.

    12. HSHarry Stebbings41:52

        Larry, what political or business leader do you most look up to, and why them?

    13. LSLarry Summers41:58

        As a academic who tries to be engaged in, uh, the world, I have always had enormous admiration for John Maynard Keynes, for the rigor of his thought, the clarity of his expression, and his willingness to always be involved in, uh, the issues of the day.

    14. HSHarry Stebbings42:32

        Is there a way to manage inflation without the poorest parts of society being the most hit?

    15. LSLarry Summers42:39

        The way to hit the poorest parts of society the hardest is to not manage inflation.... you and I can configure our financial affairs so we're hedged against inflation. We may, even by borrowing money, be able to be beneficiaries of inflation as we pay it back in, uh, cheaper forms. So the most important thing we can do for the poor is to make sure that we are effectively, uh, managing inflation. As we do that, uh, it's terribly, terribly important that we have the right safety nets in place in terms of unemployment insurance, in terms of, uh, social support, uh, payments. But make no mistake, a failure to contain inflation, a determination to not focus on inflation, it is a determination to enable the shrewd and worldly to benefit, uh, at, uh, the expense of the people who are the backbone of our societies.

    16. HSHarry Stebbings44:01

        What's the best use case for crypto, Larry?

    17. LSLarry Summers44:04

        Probably to facilitate contracting between parties who don't know each other and trust each other through devices like, uh, the blockchain. Ultimately, what has enabled capitalism to develop is institutional changes like contracts originally, like double entry bookkeeping, like the common law corporation, that facilitate, exchange, and interaction between people who don't like each other and don't trust each other. And if and where crypto can do that, it can perform a very valuable function. Unfortunately, I'm not sure that's that large a part of the crypto ecosystem. And when the ecosystem is fueling speculation or when the objective is the circumvention of legitimate government regulation or tax obligations, that's where I become more skeptical about the world of crypto.

    18. HSHarry Stebbings45:18

        Now, final one. People always have opinions. What do you think is the biggest misconception people have of you, and what would you say to that?

    19. LSLarry Summers45:28

        Oh, I don't know. I'll let people, uh, reach, uh, their own, uh, their own judgments. Uh, I'm a person who believes that, uh, there's no such thing as a bad fact. It's always better to surface any, uh, fact, and that it's really important to consider all perspectives, uh, in debate, um, because whether they're right or whether they're wrong, it's ultimately the argument that gets you closer to truth and takes, uh, the world, uh, forward. And I think that is an optimistic, altruistic, uh, view about humanity and its, uh, prospect. And I know that man- there are many others who have a perspective that sees truth as much more relative, sees argument as much less, uh, constructive. And we'll have to see what happens.

    20. HSHarry Stebbings46:54

        Larry, I've absolutely loved this. I so appreciate you answering my slightly, uh, varying questions, but this has been a joy. And thank you so much for joining me.

    21. LSLarry Summers47:04

        Thank you.

Episode duration: 47:05