Former Treasury Secretary Larry Summers is knocking the Treasury Department for downplaying the threat of inflation a day after Secretary Janet Yellen said he was “wrong” about out-of-control prices.
Summers, a Democrat who served as treasury secretary under President Bill Clinton and director of the National Economic Council under President Barack Obama, has been sounding the alarm on inflation since earlier this year. He argues that increased demand coupled with an infusion of fiscal spending and large-scale Federal Reserve debt purchases has put the United States at risk of losing control of inflation.
“[Yellen] expresses confidence that inflation is decelerating and will be back to target levels by the end of next year. I hope she is right but I think it’s much less than a 50/50 chance,” Summers said Monday on Twitter. “I began my career when Paul Volker was taking over at the Fed and not since then have I been more worried. I am curious at what point in the last 40 years Treasury thinks the risk of an inflation spiral are greater than they are now.”
INFLATION ‘SINGLE BIGGEST THREAT’ TO SOCIETY, BILLIONAIRE INVESTOR WARNS
Summers pointed out that in the late spring and early summer, Yellen said she was confident that inflation would slide back to about 2% by the end of this year or early next year, although he said that forecast “is no longer operable.”
Consumer prices rose 5.4% for the year ending September, according to a report by the Department of Labor, the highest pace of inflation since 2008. Inflation also recently hit the highest rate in 30 years in the gauge favored by the Federal Reserve, which is still asserting that inflation will settle back down in the coming months.
“I actually believe the gap between Treasury & Fed statements and the everyday experience of businesses and consumers in terms of inflation has widened in recent months,” he added. “Until the Fed & Treasury fully recognize the inflation reality, they are unlikely to deal with it successfully.”
The missive came after Yellen was asked about Summers’s repeated prognostications about too-high prices on Sunday during an appearance on CNN.
“I think he’s wrong,” Yellen said. “I don’t think we’re about to lose control of inflation. I agree, of course, we are going through a period of inflation that’s higher than Americans have seen in a long time. And it’s something that’s obviously a concern and worrying them. But we haven’t lost control.”
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Summers and Yellen have a history.
In 2013, Summers withdrew himself from consideration for an appointment as Federal Reserve chairman by Obama after he faced pressure from outside left-wing groups and liberal Democrats such as Sen. Elizabeth Warren of Massachusetts. Warren, a surging figure on the Left, preferred that Obama pick Yellen instead, which the president ended up doing.
