Tech Boom is Over, FTX Fiasco to Spark Crypto Crackdown by Larry Summers
- Larry Summers said that the tech boom is over because of the pandemic receding. Also, interest rates are rising.
- Ex-Treasury chief predicted that the FTX fiasco would lead to more crypto regulation.
- Summers doesn’t worry about another financial crisis. Banks and authorities are ready.
Larry Summers stated that the tech boom is over and that the FTX fiasco will lead to a crypto crackdown. Investors shouldn’t be afraid of another financial crisis.
The immense success of tech titans such a Amazon MicrosoftThis is in addition to the pandemic boost enjoyed the likes of Zoom PelotonDuring a conference, he observed that he experienced an “excessive euphoria” in tech. conversation hosted by The Information on Wednesday.
The virus threat is over, and the Federal Reserve has raised interest rates from almost zero to around 4.4% this year due to rampant inflation. Summers stated that the outlook for tech stocks is now dimming.
“Peloton equals Pets.com is an important equation for understanding the current situation,” he stated. Pets.com is an online seller of pet supplies. It has become a symbol for the huge hype and absurd valuations that characterized dot-com boom.
Summers is an economist at Harvard who was previously the US Treasury secretary as well as the director of National Economic Council.
He said that some of the recent excesses within the tech sector will not return until the next speculative boom. He said that investors need to reset their expectations following years of venture capitalists subsidizing user acquisition without regard for profits or sustainable development.
He said, “Participation of it isn’t coming back.” “It’s likely to be a sobering time.”
Summers also spoke out about the financial woes of Sam Bankman-Fried’s FTX, and Alameda Research that have roiled cryptocurrency markets this past week.
He stated that “What’s happening in crypto these days is going scare people” and “is going to scare regulators into taking action.” He said that some of those Bankman-Fried’s charms are “looking and feeling quite silly.”
Summers predicted that the outcome could be more aggressive regulation. This is similar to JPMorgan strategists. expectThe failure will lead to greater transparency and risk management by crypto firms.
The veteran economist also assessed the likelihood of another Lehman Brothers-type crash that sends shockwaves through financial and economic markets.
“Low, because our banking system is more capitalized than it was,” he stated. “Because the Fed has gone on hair-trigger alert. We have more precedent and are willing to throw liquidity at any leaks, especially after what happened in the early stages of Covid.”
Summers may not be concerned by systemic threats but he is still deeply worriedAbout inflation. He recently warnedThe Fed may need rates to be raised above 6% in order to fix the problem. cautionedThis type of hike will likely cause a recession and result in millions of job losses.
Read more: These 3 ‘megatrends’ will help investors get the income they need and profit from inflation, according to investing giant Franklin Templeton
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