David Gibson-Moore chaired an exclusive, invitation-only roundtable with Dr Larry Summers, one of the most distinguished voices today on issues and policies impacting the global economy. This took place at the London Edition of the AIM Summit held at the Four Seasons Hotel in the City of London on April 13, 2023.

As Secretary of the Treasury under the Clinton administration, Summers played a key role in financial deregulation efforts including the repeal of the Glass-Steagall Act. This in turn contributed to the rapid expansion of the financial sector and especially to the growth of the financial derivative sector.

His frequent commentary is now regarded as essential input to support the formulation economic policy in the United States and elsewhere. His contributions to financial thinking have been wide-ranging and impactful reflecting his diverse roles as researcher, policymaker, and public intellectual.

The title for the discussion was “high corporate debt levels in conjunction with high interest rates: a major looming risk for markets?”

We discussed the background to his often-cited secular stagnation hypothesis whereby advanced economies may face long-term weak or negligible economic growth. He highlighted the many factors contributing to secular stagnation by either driving up savings or reducing investment. Causes range from income inequality shifting more money to the wealthy who tend to save rather than spend and as a result of ageing populations which tend to spend less per capita. A slowdown in productivity will also reduce investment.

Summers indicated that he could not remember a time when there were as many economic “cross-currents” as there are right now pointing to global inflation, the widespread tightening of monetary policy, Europe’s energy crisis, Chinese policymaking and the war in Ukraine.

He highlighted the fact that some of the Fed’s work is already being undertaken by a tightening of credit – for instance to small and medium-sized businesses and, importantly, to commercial real estate. However, he felt that the chance that a recession will begin sometime in 2023 in the US is probably about 70%, which he said puts him at the pessimistic end of the spectrum of opinion.

On the geopolitical side, Summers warned of “troubling” signs that the US is losing global influence as other powers, particularly China, successfully win favour among nations not yet aligned. He pointed out the dangers of hawkish policy toward China being about the only US bipartisan policy on which all parties can agree.

A number of other key topics were raised. All together the roundtable, which lasted for over an hour, provided a fascinating discussion with one of today’s most influential global economic thinkers.