At a virtual conference coordinated by the Institute of International Finance, renowned economist Larry Summers provided a dismal economic forecast for America and Europe.
Summers, who served as Treasury Secretary under President Bill Clinton and Director of the National Economic Council under President Barack Obama, warned that inflation, and wrongful thinking by bankers due to “wokeness,” are particular areas of concern.
Summers noted that inflation is worse now than he anticipated it would be when speaking on the subject earlier this year. According to the Wall Street Journal, price levels have risen 5.4% over the last year and 6.5% on an annual basis thus far in 2021.
Interestingly, Summers pointing to “wokeness” as contributing to the spiraling economic outlook.
“We have a generation of central bankers who are defining themselves by their wokeness,” Summers noted. “They’re defining themselves by how socially concerned they are.”
Summers has strong credentials. In addition to holding substantial government positions, Summers is President Emeritus of Harvard University. He warned that “we’re in more danger than we’ve been during my career of losing control of inflation in the U.S.”
Summers noted that the situation in Europe is also bleak, stating, “We’ve gone even further towards losing it in Britain and I think we’re at some risk in Europe.”
Summers also expressed concern about the recent attempts by Democrats to move forward a multi-trillion infrastructure plan.
“The main risk is that our economy’s going to overheat,” Summers said. “And then once it overheats, it’s going to be hard to put out the fire without doing a lot of damage and causing a lot of problems. And so, I’d like to see us shift [our] policy….”
“I’m afraid things have come in worse than I expected on inflation,” Summers said in a separate interview with Australian media this week. “[In February, I thought] we were going to have inflation because of the combination of fiscal and monetary policies, and a big savings overhang.”
“What is surprised me is how tight the labor market has become, how fast,” he continued. “How many supply-side bottlenecks have returned, and how rapidly inflation has accelerated. And that seems to be translated into increases in inflation expectations.”
He concluded his comments with the following: “Well, I think we now have a gathering storm of inflation. And we’re likely to see some combination of that storm coming to fruition, or the central bank being forced to act to contain inflation with potentially serious financial consequences, or some combination of those two things. We’ve had labor market inflation wages at a seven and a half percent rate in the last month, we’ve had consumer price inflation close to a 6% rate over the last six months. We’ve had houses causing price inflation at over 20% over the last year, and almost none of that has yet been reflected in the price indices. I think they’re very serious reasons for concern.“
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