One of the big events of this week besides the queen passing was actually
what's going on with currencies with the US dollar setting record after record at
the same time. The euro is really falling on that boy.
Look at the yen. What is going on with the economies.
Look the United States has a huge advantage.
We've recognized it for a long time in terms of our lack of dependence on
egregiously expensive foreign energy. And that is benefiting the relative
strength of our economy. At the same time we've mounted a
stronger response macro economically to the pandemic.
Our central bank is moving faster to do necessary tightening with respect to
the respect to monetary policy. Given inflation and all those various
factors are making us safe haven a mecca for capital and that's causing resources
to flow into the dollar. It's remarkable that people were saying
that the dollar's day was passed not very long ago given its current
strength. And my guess is that there's room for
this to continue. You know the euro was
in the low 80s against the dollar 20 some years ago.
And in some ways the relative fundamentals of the United States
compared to Europe are even stronger now than they were that.
So Larry there's talk actually about the possibility of intervention in Japan to
try to support the yen given what you just said that it's larger macroeconomic
factors. Is it possible for Japan actually
intervene and actually shore up the yen. I tend to be skeptical that intervention
can have sustained impact on the capital markets are just so big
even relative to the resources that the authorities have that I would be
surprised. In today's world if interventions could
have large sustained impacts on maintaining the value of the yen I think
the more fundamental questions for the yen involve the level of Japanese
interest rates both in the short and over the longer term and the extent to
which the Japanese will at some point feel comfortable raising those interest
rates which is not a simple proposition given the magnitude of debts in Japan.
So we're seeing a different sort of intervention over in Europe both through
with respect to the United Kingdom where the new prime minister is trust now
isn't trying to impose a cap on the cost to households.
We also have the possibility of a price cap being agreed upon in Europe.
Is that a reasonable intervention. Is it likely to be effective at dealing
with a runaway energy costs particularly in Europe.
Look it's an extraordinarily difficult
situation and it's a mistake to be to Judge Mantle from too far away.
But when I saw the emerging plan it reminded me of standard
Latin American populist approaches fix the price and commit to unlimited
subsidy. And those policies often have not worked
out well at all for those who implemented them.
And so it seems a very dangerous course now.
I think we ought to give the British authorities an opportunity to explain
the rationale for their policy to explain the financing mechanisms behind
their policies but a policy of tax cutting avoiding taxation of windfall
profits subsidising consumers for low priced energy in the face of a nearly
unlimited potential liability. I seems to me to at least raise very
serious and severe arithmetic questions. And I think people who are thinking
about the pound are thinking about that. Perhaps the story that overshadowed the
entire week not necessarily in economics and finance but overall was the passing
of Queen Elizabeth the second at the age of 96.
And I wonder if that gives us an occasion to reflect on what has happened
to the British economy since 1952 when she became queen to the present time.
It's been through an awful lot. It's grown a fair amount in time.
And what we think is likely in store for King Charles the third in today's world.
There are very few leaders who command nearly universal respect.
And there are very few leaders who are able through decades in the public eye
to maintain that dignity and to maintain respected.
Queen Elizabeth did that and did it as recently as this year at the age of 96.
And it's a quite extraordinary thing that I think history will long remember.
She stood for taking the long view. She stood for rising above passions of
the moment. And I think those are useful lessons for
all of us involved in political economy. Useful lessons when the urge to point
scoring or cheap partisan advantage looms large in politics and useful
lessons in with respect to economics and economic policy as well.
And one has to take a longer view. And so Queen Elizabeth was always acting
not with a view to the newspaper headlines but with a view to the history
books and my counsel to those who.
Lead Britain politically at this very difficult moment is to do the same thing
and I think that's something we can all usefully keep in mind in every country.
So Larry let's convene the Larry Summers Book Club here.
What are you reading these days. I understand you have a book you like a
lot. Brad DeLong my former student now
colleague at the Treasury Department now a professor at Berkeley has written the
one economic history book that I think everybody should take a very serious
look at. Slouching Towards Utopia is the title.
It chronicles the world from the moment. Growth really took off in 1870 pretty
much up to the present. And the only thing we really can learn
from for thinking about the future economy is history.
And Brad tells it in a dramatic and strongly thematic way.
And finally Larry you were part of history this week and the unveiling of
the portrait of former President Obama and First Lady Michelle Obama.
You were there. Describe for us what it was like.
What were your reflections on that revisit of yours to the White House.
It was joyous to see the former president again and to see so many of
the colleagues I worked with in the administration.
Thanks for letting us invite a few friends to the White House.
We will try not to tear up the place. At a difficult moment hearing somebody
talk about hope and change and remember the moments of hope and change was
inspiring. President Obama spoke of how he always
thought of the presidency as a relay race.
It was his task for eight years to carry the time.
And I think that's a useful idea for us all to keep in mind.
It goes back to what we said about Queen Elizabeth.
Let's think about what future history books are going to say rather than what
two hours from now tweets are going to say.
If we could all do that. I think we'll be better off.