Summers: ‘Likely’ to Be ‘Somewhat Increased Turbulence’ Due to Rate Hikes Needed to Fight Inflation,

[mystery-ak]

Summers: ‘Likely’ to Be ‘Somewhat Increased Turbulence’ Due to Rate Hikes Needed to Fight Inflation, ‘Quite Material’ Risk of Disruption

Ian Hanchett 28 Jan 2022

On Thursday’s broadcast of MSNBC’s “Andrea Mitchell Reports,” economist Lawrence Summers stated that he thinks defeating inflation will probably require higher interest rates than foreseen by the Federal Reserve and the market, so “the risks of some form of economic disruption are quite material.” And that we are “likely” to have “a period of somewhat increased turbulence.”

Summers said, “I think we were way behind the curve. I think we stayed way behind the curve even as the inflation figures came in strong in the fall. And in all honesty, while I welcome the Fed’s significant adjustments, I think they are still behind the curve.”

He later added, “I don’t know why people believe that an increase in interest rates to below 2% is going to beat out of the system a once-in-40-year inflation. So, my own instincts are to be quite cautious about the economic prospect going forward. I think we’re likely to require higher interest rates than the Fed now foresees, more than the market now foresees, and I think the risks of some form of economic disruption are quite material.”

Summers concluded, “I was glad to see the movements in what the Fed did yesterday. I look forward to what they’re going to do in March. And, look, you can’t change the past. I do think there were substantial mistakes made in the past. But we just need to do our best going forward, and that is likely to mean a period of somewhat increased turbulence.”

more

https://www.breitbart.com/clips/2022/01/28/summers-likely-to-be-somewhat-increased-turbulence-due-to-rate-hikes-needed-to-fight-inflation-quite-material-risk-of-disruption/

[catfish1957]

"This" is what the will amount to the biden clown car economic team means by "somewhat increased turbulence"

The hurricane of hyperinflation will be upon us maybe as a Cat 5.  These f'ers are so predictable.

[Kamaji]

[DefiantMassRINO]

Not necessarily.  Inflation can also be fought by increasing productivity and efficiencies on the supply side.

[catfish1957]

Not necessarily.  Inflation can also be fought by increasing productivity and efficiencies on the supply side.

You are right.  I have been out of the work force for 10 years now, but I know my last 10 years, I was tasked to try to squeeze blood out of turnip as far as organizational improvements, redundancies, and efficiences.

I can't vouch for the rest of industry, but I just don't think there is much left to trim without seriously threatening safety.

[DefiantMassRINO]

The sectors most ripe for productivity increases and reduced inefficiencies are Government, Health Care, and Higher Education.

[catfish1957]

The sectors most ripe for productivity increases and reduced inefficiencies are Government, Health Care, and Higher Education.

 

[Kamaji]

The sectors most ripe for productivity increases and reduced inefficiencies are Government, Health Care, and Higher Education.

In other words, Government (the other two are simply outposts of the executive government by now).

[mystery-ak]

Okay...someone please explain to me how raising interest rates helps inflation...economics is not my strong suit...lol

[catfish1957]

Okay...someone please explain to me how raising interest rates helps inflation...economics is not my strong suit...lol

By that statement alone, you have 10X the economic prowess than the biden clown car.

Using the Fed to control inflation for only that particular reason?  Here is the best way to illustrate it......

[DefiantMassRINO]

Prices are a function of balance of supply of goods and services with demand; and balancing the supply of circulating dollars with demand for dollars.

The strategy of increasing interest rates is to contractdict inflation with deflation:

Fiscal - The intent of increasing interest rates to fight inflation is to dimish demand by slowing/reducing economic activity.  Reduced demand may result in more surplus goods and services, thus, putting pressure on suppliers to reduce prices.

Monetary - Also, increasing rates is hoped to fight inflation by reducing the number of dollars in circulation.  In economics, scarcity creates value.  By making the number of circulating dollars more scarce, the intent is to increase the buying power of each remaining dollar (aka, deflation).

One unknown variable beyond the control of the Fed is the velocity of money - how quickly the same dollar changes hands in the facilitation of commerce - through the economy.  Spending a dollar is inflationary because spending puts more dollars in circulation.  Saving a dollar is deflationary because saving takes that dollar out of circulation.

Another way the Fed can manipulate the number of dollars in circulation (used for spending) is to increase or decrease bank reserves (the cash banks are required to keep on hand for withdrawal).  Increasing bank reserve requirements reduces the number of dollars in circulation (deflation).  Decreasing bank reserve requirements increases the number of dollars in circulation (inflation).

Rates are as low because the Fed decided that greatest threat from the 2008 financial crisis was deflation - fewer dollars in circulation; fewer dollars available for spending and lending; assets used for loan collateral decrease in dollar value, possibly making the loans insolvent; insufficient supply of dollars in circulation drives up interest rates (the cost of borrowing money) which reduce economic activity (recession, depression).  Since 2008, the Fed has pursued inflationary monetary policy to keep a floor under the economy.  Now, inflation is a greater economic threat than deflation, so, the Fed is reversing direction to now reduce the number of dollars in circulation.

[libertybele]

By that statement alone, you have 10X the economic prowess than the biden clown car.

Using the Fed to control inflation for only that particular reason?  Here is the best way to illustrate it......

   Perfect illustration!

[Bigun]

The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.

Vladimir Ilyich Lenin

[Bigun]

"A hand from Washington will be stretched out and placed upon every man's business; the eye of the Federal inspector will be in every man's counting house. The law will, of necessity, have inquisitorial features, it will provide penalties. It will create complicated machinery. Under it, businessmen will be hauled into courts distant from their homes. Heavy fines imposed by distant and unfamiliar tribunals will constantly menace the taxpayer. An army of Federal inspectors, spies, and detectives will descend upon the state. They will compel men of business to show their books and disclose the secrets of their affairs. They will dictate forms of bookkeeping. They will require statements and affidavits..."

Richard E. Byrd, Speaker of the Virginia House of Delegates, March 3, 1910, speaking against the ratification of the 16th Amendment

[IsailedawayfromFR]

This is reacting, not leading.

The time to have dealt with inflation is before it arrives.

They are too late.  It is here

[Bigun]

This is reacting, not leading.

The time to have dealt with inflation is before it arrives.

They are too late.  It is here

When your currency and its value, is in the hands of an international banking cartel you should not be surprised by the result.

[GtHawk]

"This" is what the will amount to the biden clown car economic team means by "somewhat increased turbulence"

The hurricane of hyperinflation will be upon us maybe as a Cat 5.  These f'ers are so predictable.

This is how I expect to be affected by these economic geniuses actions

[Fishrrman]

It will take a 1982-like recession to force inflation back downward.
Along with a significant rise in interest rates.

Otherwise...?

[Hoodat]

Larry Summers is an idiot.  This is the same guy who said back in 1980 that if Reagan were elected and was able to cut the top tax rate from 70% to 28%, then we would be looking at 40% annual inflation.