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Lawrence H. Summers

@LHSummers

Mar 12

There is much fog of war surrounding the #SVB situation. Impossible to assess or prescribe with confidence, based on public information. 1/

I hope and trust that the authorities are on a path to doing what is necessary to restore confidence. Acting decisively and rapidly is both the cheapest for taxpayers and the best for the economy. Failure to act strongly enough would be a Lehman-like error. 2/

It is a clear imperative that all #SVB segregated assets and uninsured deposits be fully backed by Monday morning.

Also imperative that sufficient support be provided to other banks to insure full availability of deposited funds across the banking system. 3/

Read 6 tweets

Lawrence H. Summers

@LHSummers

Feb 28

@asdomash

New analysis with @asdomash of Phillips curve models first put forward a year ago confirms very substantial grounds for concern that inflation is not yet on a path back to 2 percent
cepr.org/voxeu/columns/…

Contrary to what others have claimed, standard models of labor market slack are not overly pessimistic as predictors of inflation, and can readily explain observed ECI wage disinflation in recent months

Many argued that the slowdown in ECI wages to 4.2% last quarter was evidence that disinflation is possible in a very tight labor market. On the contrary, we show that this level of wage inflation is consistent with what a traditional Phillips curve model predicts.

Read 5 tweets

Lawrence H. Summers

@LHSummers

Feb 26

@FareedZakaria

I told @FareedZakaria @CNN: This has evolved towards a war of attrition. That is going to make what happens to the Russian economy, and even more importantly what happens to the Ukrainian economy, central to how this plays out.

https://twitter.com/FareedZakaria/status/1629836177816842245

Russian economic sanctions haven’t really bitten that hard because less than half the world has been involved as part of the sanctions. A large part of the worlds' GDP --China, India, Turkey-- have not been part of the sanctions.

If you look at Russia's neighbors, their trade with us has ramped up considerably in the last year, which suggests they are serving as a weigh station for goods to get into Russia.

Read 5 tweets

Lawrence H. Summers

@LHSummers

Feb 25

Friday’s PCE figures, with both core and headline inflation running at 7 percent last month and big upward revisions for the 4th quarter, are very troubling.

@FederalReserve

They suggest that the @FederalReserve may have made much less progress in containing underlying inflation than has been generally supposed and make a soft landing look less likely.

If the economy keeps growing at recent rates, inflation is unlikely to settle near the 2 percent range, though there may be temporary sharp declines in inflation.

There is no real historical precedent for the idea of a managed disinflation from current levels without recession.

Read 5 tweets

Lawrence H. Summers

@LHSummers

Feb 18

@YouTube

1/The Fed's been trying to put the brakes on and it doesn't look like the brakes are getting much traction. And when your brakes don't get much traction, two things happen. You can be moving too fast, that's the inflation pressure.

via @YouTube

2/And you can be setting yourself up for some kind of collision or a crash down the road.

And both of those things, I think, are real risks in this environment.

3/We clearly have an economy where demand is super strong. The highest ratio of vacancies to unemployment we've ever seen. Retail sales on fire. The economy creating jobs faster right now than population growth by a factor of five in the latest month.

Read 4 tweets

Lawrence H. Summers

@LHSummers

Feb 18

@DavidWestin

Watch my interview last night with @DavidWestin @BloombergTV where we discuss three reasons the debt trajectory could be worse than CBO is saying.

youtube.com/playlist?list=… via @YouTube

@USCBO

First, the @USCBO projection for the @federalreserve rate to settle for the long term at 2.5%, without there having been a recession, leaves much more room to be too low than to be too high.

@USCBO

Second, @USCBO forecasts take existing policies as their baseline. My guess is that spending in national security area is going to have to rise significantly over the next decade giving the threats we are facing.

Read 4 tweets

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