- Larry Summers said the tech boom was over thanks to the pandemic receding and interest rates rising.
- The Former Treasury Secretary Predicted The FTX Debacle Will Lead To Tighter Crypto Regulations.
- Summers isn’t worried about another financial crisis as banks and authorities are gearing up.
The tech boom is officially over, the FTX debacle has spurred a crackdown on cryptocurrencies, and investors shouldn’t fear another financial crisis, Larry Summers said.
The extraordinary success of tech giants such as Amazon When microsoftcoupled with the pandemic boost enjoyed by the likes of zoom When Pelotonwhich he noted during the conference, created “tech’s over-euphoria” Interview hosted by The Information on wednesday.
Now that the virus threat has receded and inflation is rampant, the Federal Reserve has raised interest rates from near zero to about 4% this year. As a result, the outlook for tech stocks has dimmed, Summers said.
“‘Peloton equals Pets.com’ is a very important equation for understanding what’s going on,” he said. His Pets.com, an online pet supplies retailer, has become a symbol of the massive hype and ridiculous ratings that defined the dot-com bubble.
Summers is a professor of economics at Harvard University and previously served as U.S. Treasury Secretary and a board member of the National Economic Council.
He warned that some of the recent excesses in the tech sector won’t return until the next speculation boom, if at all. Investors need to reset their expectations, he continued, as the company did not consider profits or sustainable growth at all.
“Some of it doesn’t come back,” he added. “Maybe it’s time to calm down.”
Summers also touched on the financial troubles of Sam Bankman-Fried’s FTX and Alameda Research, which have roiled the cryptocurrency market this week.
“What’s happening with cryptocurrencies in the last few days is going to scare people and scare regulators into action,” he said. Some people “look and feel pretty silly,” he added.
That could result in more aggressive regulation, Summers predicted. Predict A debacle leading to greater transparency and risk management among crypto companies.
The veteran economist also gauged the risk of a Lehman Brothers-style collapse that would send shockwaves through financial markets and the economy.
“It’s lower because the banking system is better capitalized than it used to be,” he said. “Because the Fed is on alert, and especially after what happened in the early stages of Covid, we have more precedent and are willing to put liquidity in if that happens. .”
Summers may not be worried about systemic threats, but he’s not changing deeply worried about inflation.he recently warned To fix this problem, the Fed may need to raise rates above 6%. warned A rate hike of that magnitude would likely trigger a recession and put millions out of work.