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Unformatted text preview: Financial Markets: Lecture 26 Transcript April 30, 2008 << back Professor Robert Shiller: This is the second of two lectures from Lawrence Summers. Let me just say, again, this is the Okun Lecture Series created by an anonymous donor in honor of Arthur Okun. At the last lecture, I was very pleased to hear the number of fond memories that Larry Summers has of Arthur Okun. At today's lecture, I think some people felt that we didn't have enough time for question and answer, so we plan to allocate a half hour to that. Does that sound good? Larry will wrap up just before the hour and we'll have a good discussion. Professor Larry Summers: Judging by the discussions I had an opportunity to have at lunch and dinner, I would suggest a proposal for you, Bob, with respect to next year's Okun lecturer. Invite the Okun lecturer to give his first lecture, then let him have dinner and let him have lunch with the Yale faculty; then, let him ponder what he's been told for three weeks and invite him to come back and encourage him to emphasize what he was told rather than any ideas he might have. You would get substantially better Okun lectures, I suspect, as a consequence, if the feedback that I got is any guide. I want to thank everybody for their hospitality and having seen a certain number of these kinds of lecture series over time. When I was President of Harvard, my deepest nightmare, one of my deepest nightmares--some of my nightmares actually came true--but some of my lesser nightmares as President of Harvard were the sequential lecture series, where at the third lecture no one came. As a lecturer, I was concerned the judgment of those who had seen the product is of more interest than the judgment of those who have not. So, the fact that the room looks a little bit like the room looked yesterday, I take as at least mild encouragement and validation to proceed. Yesterday, I talked about two types of recessions. What I referred to as disinflation recessions, in which the Fed stepped on the brakes, the economy slowed, the Feds stepped off the brakes, the economy reaccelerated. And, what was my larger focus, financial system breakdown recessions, in which in one way or another, bubbles burst or banks face liquidity problems or the supply of finance dried up and the economy suffered. I suggested that the latter category of recession was the historical pattern of recession. That there were some signs that the more relevant problem for the United States going forward might well be the latter kind of recession as well. I implied a thought I will develop in the course of these remarks--that the incipient recession in the United States is almost certainly of the latter financial breakdown variety rather than the disinflation variety....
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- Spring '08