Larry Summers, who served as Treasury Secretary under former President Bill Clinton and director of the National Economic Council under former President Barack Obama, warned during multiple interviews this week that inflation is even worse than he suggested it might be when he commented on the matter earlier this year.
Speaking to a virtual conference organized by the Institute of International Finance, Summers also warned that woke bankers were an issue because they are focusing on the wrong thing.
“We have a generation of central bankers who are defining themselves by their wokeness,” Summers said. “They’re defining themselves by how socially concerned they are.”
Summers, who is now a professor at Harvard, warned that “we’re in more danger than we’ve been during my career of losing control of inflation in the U.S.”
“We’ve gone even further towards losing it in Britain and I think we’re at some risk in Europe,” he added.
Summers’ remarks come as new consumer-price index numbers show that inflation is continuing to remain high. Price levels have surged 5.4% over the last 12 months and 6.5% on an annual basis so far in 2021, according to The Wall Street Journal.
Summers said earlier this year that the size of Democrat President Joe Biden’s economic stimulus was causing the economy to “overheat” and that it may melt down if Democrats did not start pumping the brakes.
“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 towards a policy concern. I mean, let me give you another example.”
During a separate interview with Australian media this week, Summers gave a stark warning about inflation.
“I’m afraid things have come in worse than I expected on inflation,” Summers said. “My view is, in February, was that we had a lot of demand coming down the pike that eventually the bathtub was going to overflow. And 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. How many supply-side bottlenecks have returned, and how rapidly inflation has accelerated. And that seems to be translated into increases in inflation expectations.”
“Well, I think we now have a gathering storm of inflation,” he continued. “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.”
Summers later added that he believes that the U.S. is facing “a pretty unstable financial environment”