Communication is an essential part of a central banker’s job. Particularly with the increasing use of forward guidance, markets are becoming exceptionally sensitive to the nuances of bankers’ words. With Larry Summers one of two candidates believed to be in contention to succeed Ben Bernanke as Fed Chair, it is worth reminding ourselves of his style of communication. There is no doubt the man is a brilliant economist but he does have a tendency to shoot from the hip:
Summers resigned as Harvard’s president in the wake of a no-confidence vote by Harvard faculty that resulted in large part from Summers’s conflict with Cornel West, financial conflict of interest questions regarding his relationship with Andrei Shleifer, and a 2005 speech in which he suggested that the under-representation of women in science and engineering could be due to a “different availability of aptitude at the high end,” and less to patterns of discrimination and socialization.
Summers stated in a 1991 interview: “There are no… limits to the carrying capacity of the earth that are likely to bind any time in the foreseeable future. There isn’t a risk of an apocalypse due to global warming or anything else. The idea that we should put limits on growth because of some natural limit, is a profound error and one that, were it ever to prove influential, would have staggering social costs.”
In December 1991, while at the World Bank, Summers signed a memo … stat[ing] that “the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that…. I’ve always thought that under-populated countries in Africa are vastly underpolluted.”
Some of these statements have moderately extenuating circumstances but there’s no question that he’d be able to move markets with a single whip of his tongue!