Larry Summers says too early to give the all-clear for banking…

Larry Summers says too early to give the all-clear for banking…

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Former Minister of Finance Larry Summers plunged into a variety of issues, including inflation, the economy and the banking crisis a recent interview with Bloomberg.

Split result: You shouldn’t make too much of it recent government data showing a slight decline in inflation, said summer. “I think we’re still an essentially unsustainable inflationary country, unless the economy collapses pretty badly in response to the credit problems raised by the banking system,” he said called.

The results could be mixed, the former tax official said. The banking crisis can pass without incident and without much impact on lending, making inflation strong and requiring it federal reserve attract a lot more than what’s priced in, he said.

Alternatively, there could be a real downturn, Summers said, adding that even in the best of environments, soft landings are very difficult.

Recognize credit crunch: When asked when it’s clear a credit crunch is coming, Summers said that historically, there hasn’t been just one big downturn during a financial crisis. In the week of Lehman Brothers’ collapse in 2008, the stock market was up and the Fed didn’t cut interest rates, he said.

It’s too early to give the all-clear, but things are at a point where there appear to be fewer panicked weekends of bank runs, the economist added. Although he doesn’t completely rule them out, he said there’s less than a 50% chance of this occurring.

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Summers said the question now is whether the impact of the credit constraint isn’t linear — in other words, where the constraint leads to falling asset prices and in turn to non-performing loans and more credit constraints.

“I think we’ll be well past the summer before I would feel confident that it wasn’t going to be non-linear,” he said.

Summers also took offense at the amount of money Federal Deposit Insurance Company

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