Saturday, February 6, 2021

AOC Attack on Larry Summers

Larry Summers

Former Harvard president and Keynesian economist Larry Summers is out with another Washington Post op-ed warning about the $1.9 trillion Biden "stimulus" package.

The key takeaway from the essay:

[W]hile there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability. This will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply. Stimulus measures of the magnitude contemplated are steps into the unknown.

Summers nails it. This is pretty much the warning I am delivering in the EPJ Daily Alert

This is pretty impressive stuff coming from an establishment crony. He will actually trot out economic basics when the threat is big enough.

Contrast this with the economically ignorant Alexandria Ocasio-Cortez who attacks Summers for not being on board with the over the top spending:

I am marking this post #ForFutureReference for when the price inflation really starts to heat up.

By then the advocacy by AOC of irresponsible spending should be obvious.

Summers is going to be proven right about this one.



  1. AOC will just blame Reddit speculators for the price increases in the future.

  2. I really am curious what your thoughts on how a Biden administration will handle the coming inflation Bob. You made the point in your last podcast that Biden is putting people in his administration who are completely unqualified. Inflation getting out of hand is one thing, but what happens if this turns into stagflation? I mean it doesn't seem like the Keynesians have an answer for this one. Even if Powell is thrown out for a character like Volcker, this would send interest rates sky high and the debt the government is holding is significantly more than in the 1980s. I assume Larry Summers would be asked to join the administration as he would seem quite prescient. Especially compared to the likes of Krugman that is going along with the idea that there is nothing on the horizon to indicate an increase in inflation. Nothing about this bodes well.

  3. Everyone seems to omit the fact that “inflation” to most people is just the price of things. So when the government just keeps showing garbage manipulated data that says there is no inflation, or as is frequently done, shows that it is quite low and such, the vast majority of people will go right along with it. Sure if say gasoline prices hit $4/ gallon in Texas perhaps then people might get it. But the slow boil of rising prices is hardly noticed and in many cases dismissed by the Econ world even as something that was six ounces and $2 is now five ounces and $2 which is a pretty steep measure of inflation yet the price did not change so statistic cover is easily produced.
    Anyone check the price of automobiles over a decade or two? Many commercial and residential rentals have skyrocketed since 2010. This idiotic idea advanced that rising home prices is by any standard a good thing is another tangential moronic notion stuffed down the throats of a gullible public. How about “healthcare” which I put in quotes because it is anything but health. Show me that graph and I think it will be parabolic.
    How long can those with the levers of monetary control keep this up before it goes super bad? Well I have been eating expertise that this scenario of “inflation” is just around the corner for about thirteen years and there has been no action taken in that time to even slow down the activity so...apparently it might seem that it can drag on for quite a while. Perhaps it will just continue to be a slow boil in which the vast majority of people in this country will never notice it and just like with the lockdowns, business mandates, and never ending governmental harassment they will just keep bending over and taking it without either noticing it or making a sound.
    Meanwhile some folks will see it as a great thing as long as their house is supposedly worth more and their 401k is fat.

    1. Artless, no one and I mean no one other than maybe Charles Hugh Smith talks about the stealth inflation you describe ... its the economies biggest dirty little secret.

      The middle class is being gutted and no one seems to mind it.

  4. Imagine being a legislator in Washington, one with an economics degree from an elite university, who thinks you can glibly reject a basic warning from a well-respected mainstream economist without addressing the substance of his concerns.

    Pretty pathetic, right?

    $1.9T is a gaping hole in the roof.

    As a wise man has been known to say from time to time, hug your gold coins tight.