Larry Summers

It's too early to know.

And, you know, we've seen a lot that has been threatening to Fed independence, an unprecedented degree of rhetorical attack publicly from the president on the Fed.

involvement of the president in criticism of the Fed over a relatively minor matter, the construction of a building, announcements by the president of various kinds with respect to the composition of the Federal Reserve.

So I don't think there's any question

that we're facing the most severe challenge to Fed independence in the last two generations.

Well, I think that...

I don't know that I want to call it the beginning.

There have been various things that have happened in the past, but I would say it's the gravest, most extensive politicization of the Fed in more than 50 years.

And what we know from experience around the world and from our own historical experience, for example, with Richard Nixon and the then chairman of the Fed, Arthur Burns, is that when

monetary policy is politicized and when it is perceived as politicized, everybody expects higher inflation.

And then that higher expected inflation as wage earners bargain, as price setters set prices, becomes

a self-fulfilling prophecy and you get higher inflation.

And if you want to do something about it, then when everybody's expecting higher inflation and pushing prices way up, if you don't validate that by printing money, you end up getting a recession.

So it makes it harder and worse for everybody.

And that's why most countries in the world have moved to having institutions based on independent central banking.

And you saw a bit of market response.

It wasn't a dramatic response.

market response last night, but it was a revealing one.

You saw short-term interest rates go down because people thought, gee, if it's so political, the Fed's gonna cut more.

You saw long-term interest rates go up because people thought we're headed for more inflation.