Former U.S. Treasury Secretary Summers warned that it was too early to be certain that the U.S. financial crisis caused by rapid interest rate hikes had passed.
“If an earthquake continues to shake, it will take a long time before we can be sure it won’t shake once more,” Summers told Bloomberg Television.
Former U.S. Treasury Secretary Summers Interview
Source: Bloomberg
He said the chances of a repeat of the bank runs that led to the failures of Silicon Valley Bank (SVB) and Signature Bank earlier this month were “well below” 50%, but other “accidents” leading to a credit crunch were likely. He continued that it might still happen.
The key, he said, is whether financial dynamics develop in a “non-linear” fashion, where “a credit crunch leads to asset price declines, bad loans, and a further credit crunch.”
“It’s too early to give the green light,” Summers said.
Original title:Summers Warns ‘Too Early’ for All-Clear on US Financial Turmoil(excerpt)
