By Jeffrey Coburn—On September 27, 2016, the Federal Reserve of Dallas, Texas, held its Global Perspectives Speaker Series, featuring Former Treasury Secretary Lawrence H. Summers. I was interested in going to the event because I want to learn more about financial economics and international economics, and two of the CSB professors, Dr. Hassan Shirvani and Dr. Daniel Perez, recommended that I go. In addition, I’m interested in working for the Federal Reserve. During the event, Mr. Summers first talked with Dallas Fed President Robert Kaplan, and then there was Q &A.
Below I have paraphrased some quotes from Former Treasury Secretary Lawrence H. Summers, in order to highlight the wealth of information I gained at this event:
- I am the nephew of two Nobel laureates in economics.
- Academic politics are so vicious because the stakes are so small.
- The Fed should not raise interest rates, partly because it would be a shock at a fragile moment, and partly because inflation expectations are falling.
- Whenever Donald Trump goes up in the polls, the value of the peso goes down… Just because Donald Trump says something doesn’t mean he’s wrong. LaGuardia Airport has much room for improvement.
- The US should continue to trade with Mexico and help Mexico’s economy. Nowadays, the amount of immigration from the US to Mexico is roughly the same as the amount of immigration from Mexico to the US.
- The wealthy CEO of Wells Fargo did not prevent much corruption in his company, and many Wells Fargo clients unfairly lost money. The CEO has not been charged with any crimes.
- Many blue-collar workers (such as coal miners) have lost their jobs. Technology may eliminate more American jobs. Drivers and people who work behind cash registers may be eliminated.
- When American males stop working, they tend to desire to remain unemployed. Roughly 1 out of 7 American males aged 25-54 is out of work. This is a much higher percentage than in earlier years. Nowadays, there are video games and a wide variety of TV channels, but earlier, there were no video games and very few TV channels.
- I continue to support the repeal of the Glass-Steagall Act, and we can reduce the risk of a financial crisis by allowing banks to engage in a diverse range of practices (like banks in Canada). Canada was one of the few countries that emerged relatively unharmed by the recent financial crisis.
- Education of young people is the most important investment for the USA’s future. After I spoke at one event, I was asked why students should believe that education is the most important thing when paint on walls is peeling in schools, but paint on walls is not peeling in restaurants and many other locations. I did not have an answer for the question.
- Our trade agreements have had the wrong priorities. We would negotiate a trade agreement in financial services, and what was it about? Could insurance company X sell insurance in Malaysia? Could Goldman Sachs do underwriting in country such-and-such? How many ATMs could bank X open in country Y? People saw this and thought, “Who cares, why is this a major thing that the United States is negotiating over, and why doesn’t it negotiate over things that I care about, like other people not subsidizing their products and taking my job away?”
Overall, the most interesting pieces of information I heard from Mr. Summers at this event were his suggestions for the Federal Reserve: He believes that there should be modifications to the Fed’s current posture: “It should acknowledge that the neutral rate is now close to zero and it may well remain under 2 percent for the foreseeable future. Also, it should acknowledge at least to itself that it has damaged its credibility by repeatedly holding out the prospects of much more tightening than the market anticipated, being ignored by the market, and then having the market turn out to be right.”
I had a fantastic time at the discussion with Mr. Summers, and I learned a lot about financial and international economics. I’m glad I had the opportunity to go to this event. Thanks for the recommendation Dr. Perez and Dr. Shirvani!
UST, Cameron School of Business, Master of Science in Finance-Candidate