Larry Summers predicted inflation, but now he sees the bright side

Larry Summers predicted inflation, but now he sees the bright side

“I would give you a very simple economic truth: Would you rather live in a country that capitalists are rushing into, or would you rather live in a country that capitalists are rushing out of?”

—Larry Summers

Economist Larry Summers issued an upbeat note on the US economy on Wednesday despite high inflation and tough times ahead.

Summers, former US Secretary of the Treasury under President Bill Clinton, gave a talk on the future of the economy at Salesforce Inc.’s CRM,
Dreamforce conference in San Francisco. In a conversation with Salesforce co-CEO Bret Taylor, Summers discussed his high-profile warning, via a Washington Post op-ed early last year, that the president’s COVID-19 stimulus plan Joe Biden would help trigger inflationary pressures.

“It turns out you were right,” Taylor told Summers, who was also president of Harvard University.

“It’s unlikely we’ll be able to pull off a soft, easy landing,” Summers said. But she added that the United States is making adjustments, such as raising interest rates, and will “overcome” those adjustments. The Fed raised interest rates again on Wednesday and signaled new measures for the end of the year.

Acknowledging that he has said “some negative things,” Summers went on to tell the packed audience of the Blue Shield of California Theater at the Yerba Buena Center for the Arts why he thinks America will be okay: It’s still a country that immigrants all over the world are wanting to enter; it has the “best universities” and the “greatest entrepreneurship”; it is home to the headquarters of many large companies; and is energy independent.

He said “we are not dependent in the way that Europe is dependent on a pipeline controlled by a tyrant,” adding that “that puts us in a stronger position to weather this and work through this.”

Watch: Gas prices in Europe fall to their lowest level in a month in hopes that Putin’s energy war will falter

The former secretary then shared his thoughts on China, saying that that nation has had “difficulty with COVID” and it’s unclear whether its vaccination strategy will overcome that. He also pointed to other challenges in China, including a continued low birth rate and many empty apartments.

“You look at financial crises globally, they tend to have roots in real estate,” Summers said, predicting “a tough time ahead” for China.

His parting thought on China was related to its position in relation to the United States. “The tide of history is moving toward us,” he said. “People are afraid of depending on [China].”

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