Larry Summers, former Director of the National Economic Council under Barack Obama, has issued a warning about the state of the U.S. economy. In an interview with Bloomberg TV, he said that the Federal Reserve’s attempts to control inflation with interest rate hikes are not working, and that the country could be headed for a “collision or crash down the road.”
Summers attributed the problem to a demand-heavy economy, with retail sales soaring and more jobs being created than there are people to fill them. Interestingly, he didn’t mention Biden’s insane spending but I digress.
The problem with such a strong demand, according to Summers, is that it puts pressure on prices, causing inflation. If the Fed tries to slow down the economy too quickly, it risks triggering a recession. This is a delicate balancing act, and one that Summers believes the Fed is struggling with:
“The Fed’s been trying to put the brakes on and it doesn’t look like the brakes are getting much traction. And when your brakes don’t get much traction, two things happen. You can be moving too fast: that’s the inflation pressure, and you can be setting yourself up for kind of a collision or crash down the road. And both of those things, I think, are real risks in this environment.”
Summers’ warning comes on the heels of January’s inflation rate of 6.4%, which was worse than expected. Some economists, such as Sinem Buber of ZipRecruiter, fear that the road ahead could be “rocky.” Investors are also worried that the Fed will raise interest rates even further in response to the strong demand, which could slow down economic growth.
One of the reasons for the strong demand is the massive $1.9 trillion stimulus package that Joe Biden pushed through Congress earlier this year. Summers had warned at the time that such a large injection of money into the economy would likely lead to inflation, and it appears he was right.
The problem is compounded by the fact that the package includes a range of unrelated and questionable spending measures, such as funding for museums, theaters, and other cultural institutions.
This is not the only example of the Democrats’ reckless and ineffective economic policies.
For instance, the party has been pushing for a $15 minimum wage, which would hurt small businesses and lead to job losses, particularly among low-skilled workers. They have also advocated for higher taxes and increased regulation, which would stifle innovation and entrepreneurship.
It’s time for a change. We need leaders who understand how to create a healthy and prosperous economy, not ones who prioritize political posturing and virtue signaling over sound policy. We need to support businesses, encourage innovation, and reduce government interference in the economy. Let’s hope that Larry Summers’ warning is heeded before it’s too late.
