{"id":1214176,"date":"2022-01-13T13:19:26","date_gmt":"2022-01-13T18:19:26","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1214176"},"modified":"2022-01-13T13:19:33","modified_gmt":"2022-01-13T18:19:33","slug":"summers-fundamentally-unsustainable-inflation-situation-was-foreseeable-and-believing-it-was-transitory-has-put-us-way-behind","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/summers-fundamentally-unsustainable-inflation-situation-was-foreseeable-and-believing-it-was-transitory-has-put-us-way-behind\/","title":{"rendered":"Summers: &#039;Fundamentally Unsustainable&#039; Inflation Situation Was &#039;Foreseeable&#039; and Believing It Was Transitory Has Put Us &#039;Way Behind&#039;\u00a0"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">34<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fsummers-fundamentally-unsustainable-inflation-situation-was-foreseeable-and-believing-it-was-transitory-has-put-us-way-behind%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1214176&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><div><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/01\/Summers-1116-Thumbnail-640x335-1.jpg\" class=\"ff-og-image-inserted\" alt=\"image\" \/><\/div>\n<p>On Wednesday\u2019s broadcast of CNN\u2019s \u201cOutFront,\u201d economist Larry Summers said that there is \u201ca real problem\u201d with inflation that \u201cwas a foreseeable problem a year ago,\u201d and \u201cwe\u2019re looking at a situation right now that is fundamentally unsustainable.\u201d But \u201cby continuing to believe this narrative of transitory inflation and it\u2019s all going to be okay, we\u2019ve gotten ourselves way behind where it\u2019s much harder to deal with than it would have been if we had understood more fully what our problem was six months ago.\u201d Summers also argued that there\u2019s \u201ca substantial risk\u201d of \u201ca wage-price spiral, in which higher wages lead to higher prices and higher prices lead to higher wages and we\u2019re off to the races.\u201d<\/p>\n<p>Summers said, \u201cLook, we have a real problem. I think it was a foreseeable problem a year ago, given the amount of money that was infused into the economy. But it took seven years after the Vietnam War started to get inflation up to this level. Inflation\u2019s now 50% higher than it was when Richard Nixon imposed price controls to stop what was seen as terrible inflation at that time. I don\u2019t think there\u2019s much question that we have an inflation problem that\u2019s not usefully thought of as simply a transitory issue. The real concern is that we\u2019re going to get a wage-price spiral, in which higher wages lead to higher prices and higher prices lead to higher wages and we\u2019re off to the races. And that is still a substantial risk starting from where we are. I can\u2019t conceive that we\u2019re going to see the kind of 16% mortgage rates that you referred to from the early \u201980s, Erin. But I sure do think that interest rates are going to have to rise significantly from where they are. And we\u2019re going to have to get used to the fact that our problem is not that our economy is too weak. Our problem is that our economy is too strong. There\u2019s too much demand, relative to the supply capacity of our economy. There\u2019s not a lot we can do to change the supply capacity in the short run and that means that we don\u2019t want to have just rising inflation, we\u2019re going to have to limit demand.\u201d<\/p>\n<figure id=\"D-ROS-B1\" class=\"a8d\"><\/figure>\n<figure id=\"M-ROS-B1\" class=\"a8d\"><\/figure>\n<figure id=\"gmxrevmore\" class=\"H\"><\/figure>\n<p>He added, \u201cI think there\u2019s every reason to expect that interest rate increases are going to be necessary. I think it\u2019s hard to believe that, given that we\u2019ve got 7% inflation, raising rates from 0 to 1 or even from 0 to 2 is going to be sufficient to contain the inflation. The main scenario where you wouldn\u2019t have to raise interest rates is one that nobody wants, where we start to see our financial institutions and our asset prices implode. If you saw a sudden decline in stock prices, for example, then you wouldn\u2019t want to be raising interest rates, but that\u2019s hardly an outcome that would suggest economic stability or economic health. So, I think we\u2019re looking at a situation right now that is fundamentally unsustainable. And the question is going to be can we achieve a gradual braking of the economy that permits this overheating to ease and inflation to come down? And I sure hope we can and I\u2019ve got a lot of respect for Jay Powell, but by continuing to believe this narrative of transitory inflation and it\u2019s all going to be okay, we\u2019ve gotten ourselves way behind where it\u2019s much harder to deal with than it would have been if we had understood more fully what our problem was six months ago.\u201d<\/p>\n<p><em>Follow Ian&nbsp;Hanchett on Twitter&nbsp;<a class=\"x5l\" href=\"https:\/\/twitter.com\/IanHanchett\" target=\"_blank\" rel=\"noopener external\">@IanHanchett<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On Wednesday\u2019s broadcast of CNN\u2019s \u201cOutFront,\u201d economist Larry Summers said that there is \u201ca real problem\u201d with inflation that \u201cwas a foreseeable problem a year ago,\u201d and \u201cwe\u2019re looking at &#8230;<\/p>\n","protected":false},"author":33,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1214176","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1214176","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/33"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1214176"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1214176\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1214176"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1214176"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1214176"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}