It is inauguration day. So early in the morning. Alreadyre is i amendments to it, things in washington that are so different than anything we have seen in our lifetime. And many people would say pretty much within the modern political ear. It will be different today in washington. Nrancine like its bee different for the last six months. A busy show from the u. S. Treasury secretary and the harvard present emeritus, larry summers. Then the riksbank Deputy Governor. Secretaryato general. Lets get to bloomberg first word news. Donald trump has promised to unify america as he prepares to move into the white house. Speaking on the eve of his inauguration in washington, he vowed to carry out his campaign wages to harden the borders and strengthen the military. Mr. Trump it is a movement that started and it is a Movement Like weve never seen anywhere in the world, they say. Theres never been a Movement Like this. And its something very, very special. And were going to unify our country. And our phrase, you all know it, half of you are wearing the hat. Make America Great again. Nejra george soros has called donald trump a con man who will fail because its ideas his ideas are contradictory. He warned that the stock market rally since the election spurred by the president elect promises to boost spending will come to a halt. George soros right now, peak. Ainty is at a and actually uncertainty is the enemy of longterm investment. So, i dont think the markets are going to do very well. Right now they are still celebrating, but when reality comes, it will prevail. Nejra janet yellen has backed a strategy for gradual raising rates. The central bank has not been behind the curve but admitted it cannot afford to let the economy run too hot. Yellen said fiscal policy is one of the many uncertainties the fed has to deal with. Hasu. K. Prime minister offered her stronger support yet for the city of londona as brexit moves closer. Her comments, as large banks prepare to move staff abroad after the u. K. Leaves the e. U. Value financialav services and the city and Global Britain will do just that. Nejra global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. This is bloomberg. You so much. Nk we have been looking forward to this interview for three days. I was lucky enough to have Lawrence Summers, former u. S. Treasury secretary, on a panel. Tom a very successful panel. Francine thank you so much for coming on. We spoke to george soros. He said this next year will be disastrous, part because he is hockin ghis book. Lay out for us what President Trump means for america and the next four years. Mr. Summers there it hard to know. I think the risks are greater than many people suppose. Biggest breaks are probably not in the economics area. Biggest ricks are geopolitical biggest risks are geopolitical with huge provocation visavis china and the unprecedented allies withour nato the soviet union with challenges to something that has been at the centerpiece of american for policy support for european unity. And with unpredictability visavis the volatile middle east. I think there are big risks in that area. Big risks in terms of the approach that is being taken to american democracy, the extent to which our new president is engaged in demonization of particular group slick muslims, like muslims, the extent to which she has called into question the traditional rule of law with ad hoc approaches to making demands of individual companies. All of that is i think a cause for concern it in the economic area it is hard to know. My judgment has been that the current wave of optimism is something of a sugar high, and that before long, the consequences of the strong dollar, of substantial policy uncertainty will be felt in markets and Economic Growth. That is a judgment can francine i keep being told he is a businessman. A businessman does not want to trade war, unless it is a negotiating tactic. Mr. Summers i have been very troubled by the attitude of Business People from the United States here in davos. E months agowothre were saying he was a man they would never do business with are today hailing him as a great economic statement. Tom hes 100 right. It has been stunning the turnaround. People who were terribly afraid of what this would mean for americas place in the world are now hailing those who surround hailhail those around donald trp as great geniuses. You know, every time you look at some kind of moral disaster, whether it is a bully on a playground, whether it is what , europe in theon 1930s, the key to it is that there were not the people that did wrong. Goodey to it as that people went along and did not get in the way. I see a very disturbing tendency to enable whatever the instinct of this new administration is. I think thats something that overtime the Business Community may come to regret. Tom in the generous time we have are you this morning, the historic day for america and the Global Economic system, i want to take you back to the work of pauls our unlcescles, samuelson. It change the word. If you handed samuelson to the president of the United States, which chapter should he read . Mr. Summers i dont think mr. Trumps problems are what he does not know. It is the things he knows that arent so. Tom give us one idea. Mr. Summers it is the conviction that mercantilist protectionist economics somehow drives prosperity, which i think almost all economists i would agree is a confusion. Its the believe that somehow you can base a capitalist system not on rules but on individual ad hoc deals. I think that is another substantial thing. Tom what will be the ramification of a neo mercantilism, we hear from wilbur ross, hear it from peter navarro, what will be the outcome for the diehard Trump Supporters that were at the Lincoln Memorial yesterday and will be at capitol hill today . Mr. Summers ultimately their incomes are going to be lower because they will be playing higher prices for the products they buy. Ultimately, they are going to be poorer because of a cycle of protection that is going to weaken the Global Economy. And ultimately, the consequences of all this, once it works through Exchange Rates is going to be exactly the opposite of what is hoped. Think about mexico. Yes, he had a conversation with a ceo and a few hundred jobs got preserved for some interval. At the same time, the mexican that means 15 and for anyone considering locating business in mexico or ohio, mexico now has a new 15 cost advantage. So, think it is all going to be very counterproductive. Francine what are the checks and balances . Will it be congress, or will it actually be the constitution, or will it be the markets and the high dollar . Mr. Summers i hope it will be some combination of all three. Theuld have hoped that Business Community would have be en, and the sentiment of the Business Community and the Business Community is hugely respected in america and has substantial influence in congress. And i would have hoped that the Business Community would have been a substantial moderating influence, but after seeing davos, i now have much more doubt about that. Francine the problem is that it is easy for them to see the elite is out of touch. Mr. Summers i do not think that is the key to this. I think the key is whether they where medium term view their success in america success go very much together or where the theyre so mesmerized by the possibility of a tax break in the next months, that they lose sight of their longerterm interest. Francine the trump tweets. Minutes, 1. 3ive 1. 53n of market cap billion. Is that why they are afraid to speak up . Mr. Summers that is part of it. I think part of it is that our rhetoric coming out of the administration thats more celebratory of business. They have legitimate concerns about excessive regulation and in the previous administration, i always have said for years now, that confidence is the cheapest form of stainless. Retrospect, more couldve been done to promote business confidence. Its a complex thing, but i do not think any of that justifies the kind of enabling of what i think are quite dangerous policies, practices and rhetoric, that i think the Business Community has been engaged in. Tom i want to go back with your ther on time magazine, Common Ground between summers economics and economics of john taylor at stanford university, which is dollar dynamics are smooth and in control and the elites have control of those dynamics and then they unravel. You mentioned mexican peso. Against theto one u. S. Dollar. Are we near a point where those exchanges is the litmus paper of a system suggest we could unravel, or does this president have room to move to learn on the job . Mr. Summers you never really know. Things are stable until they are not. To that is one seeking encourage volatility, thats why imprudent administrations, the custom has evolved that president s do not make casual commentary on currency, on currency values. I think there are risks. I do not know what the imminence of those risk is. I think anybody who tries to say there is going to be doing going tomorrow for sure doom and is making aow mistake. I would be the first to recognize there are substantial uncertainties, but i certainly also think we are taking risks and our new president is being enabled in that risk taking by to normallyne looks to be appropriately cautionary. Francine it was Stephen Mnuchin in his hearing saying that we should call china a currency manipulator, or do we need to be more subtle in our dealings with china . Mr. Summers if china manipulates its currency, we would be right to call that out. Sentient observer of what is going on now will recognize that china is spending huge quantities of reserves and engaging and very substantial controls with the objective of preventing its currency from falling. So, the suggestion that somehow china is driving its currency down for a competitive advantage was a sensible thought and a reasonable analysis years ago but makes almost no sense in the context of this moment. Tom help us with the emotion that you created with bloomberg days ago ofe 10 speaking of economic creationism. That is a loaded phrase. Define that further and define how the people around mr. Trump can help them towards a more traditional Economic Analysis . Mr. Summers well, i used the term to refer to a paper that was written by two apparently central figures in the Trump Administration, wilbur ross and peter navarro, that would be the kind of example of, one would give on a freshman exam of an Economic Analysis. Tiitsssecting correct in suggestion that anything that reduced imports increased the gdp which is a ludicrous suggestion. That climateay denial violates science and in the same way that creationist science violates what we know equalbiology, this is an level of fallacy. What willat is ultimately drive policy in this Administration Remains to be seen. Francine what are the chances of a trade war between the u. S. And china . Mr. Summers the chance of a cycle of protection and retaliatory protection has to be as high as its been anytime in the last 25 years. And there certainly are real risks. Francine 50 50 . Mr. Summers i am not going to handicap beyond saying that its needs deal higher than it to be. And it seems to be that some statge has been set for imprudent action. What the new administration will actually do, i very much hope they will decouple the taiwan issue and the trade issue, because i think that linkage is unsound. I hope they will pursue legitimate u. S. Commercial interests in china but do so in a prudent way. Tom very quickly, this is so important, secondary kissinger will speak today to this davos audience. He wrote the book world order. Is this a new world order with President Trump . Mr. Summers it remains to be seen. As i said, what will happen, i am concerned the United States it may or may not have been theistic as was common in Clinton Administration to refer to gods states as the indispensable nation. Refer to the United States as the indispensable nation. Almost everyone would agree that the United States given its strength has done a lot to underpin a global system. A global system that, for all the problems, has done very well and the 70 year since the second world war. I think we are seeing more risk of the United States abandoning that role than certainly any time i have ever observed. Francine thank you so much. Larry summers, the former u. S. Treasury secretary. Now, coming up today, you all know on bloomberg, we will bring you special coverage of Donald Trumps inauguration as the 45th president of the United States of america from 3 p. M. U. K. Time. Next, we speak to australias finest minister. Well be asking about donald trump and commodities. This is bloomberg. Francine this is bloomberg surveillance. Here in davos. Lets get straight to another great interview. He is the finance minister of australia. Thank you for joining us. We are couple hours away from donald trump being inaugurated the 45th president of the United States. What does that mean for trade, are you concerned about tar iffs. Also you has been a strong and reliable friend of the United States. Confident we are very that the Trump Administration is going to be very focused on that america is a strong and successful as possible, as strong as accessible america will be good for the world and good for australia, and we look forward to doing lots of business with you. Is thee minister, this u. S. Australia relationship. There is another relationship that you are very reliant on, the chinaaustralia relationship. What happens if there is a trade war between the u. S. And china . You get in the middle of that. Mr. Cormann we dont believe that there will be, there should be a trade war. We do have a very strong relationship with the u. S. The United States is our largest destination for investment, our largest source of investment for our investment and china is our largest trading partner, the u. S. Is our second largest. These are two very important trading relationships. We look forward to them going from strength to strength in the years ahead. Francine i have not heard that optimism from many people here in davos. What kind of impact will his policies have on the region . Ific there must be a little bit of concern, even if we need to give him a time to understand his policies. Mr. Cormann it is too early to tell. From our point of view, we look forward to working with the Trump Administration. There was a range of areas where a stronger has an interest, we are committed to the transpacific partnership. And we are committed to proceeding with it. It will be conversations to be had in relation to this, not only with the u. S. But also with other other countries than australia that are part of that. But we have got to give this time and we look forward to engaging positively and constructively. Francine are you concerned about the level of the aussie dollar . This is one of the strongest performances. It must hurt your ability to get away from mining and to tourism and exports. By cormann the value is set the markets. Not something that is controlled by a government, and that is an important feature of our system. It is one of the economic stabilizers in our system. It is what it is. Francine talking about the surplus, the s p warned that it was remaining pessimistic about the governments forecast to return to surplus by 2021. Are you sticking to that target . Mr. Cormann after the budget, all three major ratings agencies confirmed australias aaa Credit Rating. It is true our projection is for return to in 2021, and that is based on what we know today about economic setting and all the policy decisions that are reflected in our budget. We are committed to reaching our target and to doing every thing we can to ensure our budget is in the storm as possible position. Francine but what you doing to make the rating agencies out looks a little more optimistic . Mr. Cormann what the rating agencies want to see as we are implementing our plan. They want to see we can lead to legislative budget improvement. Over the last three years we made progress. Since the last election we have made significant progress. I think they will want to see that continue. Francine i was trying to go to the report this money. The language is pointing to an immediate loss of the aaa Credit Rating that could come as soon as may. Is that now inevitable . Mr. Cormann it is up to the ratings agencies, but i would say every budget update, there has been a lot of speculation. Every time there has been speculation the ratings agencies cap confirmed that the aaa have confirmed that the aaa rating has been delivered. We do the best we can every day to put the budget and the best possible position. And itll be for others to make judgments and up to the ratings agencies to decide how they want to approach it. Francine how critical is that rating . Mr. Cormann it is important to rid of course, it is important in the terms of the cost of borrowing in a story. We value our Credit Rating and we are focused to doing what we can to ensure the budget is in the right position to preserve it. Francine we have been speaking to a number of minors and investors and mining companie