Former Treasury Secretary Larry Summers made clear Sunday that the chance of a recession is becoming more and more likely.
On CNN’s Fareed Zakaria GPS, Zakaria spoke with Summers about the upcoming release of America’s second-quarter GDP data next week. With first-quarter GDP showing an economic contraction, Summers asked if he thought there was a chance of a recession.
“I think there is a very high probability of a recession. When we were in a situation like this before, a recession was always followed mainly by it. When inflation is high and unemployment is low, an easy landing is more a kind of victory of hope than experience. I think it is unlikely that See one,” Summers said.
A recession occurs when the US economy experiences two consecutive quarters of contraction. After reports that inflation has reached a new high of 9.1% for decades, there are renewed fears that the country is in a recession.
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Summers, who served as director of the National Economic Council during the Obama administration, was similarly pessimistic about the ability to manipulate inflation.
“Whether or not we put inflation fully back in the bottle with this stagnation or not, I think it is very difficult to judge at this point. I am encouraged by the Fed’s commitment to do so, but other central banks at other times have announced to be compliant but have not done enough once it backs off. “The economy is to make sure that inflation has come down significantly. So I think there is also a greater risk of stagflation and this episode is staying with us for a number of years compared to the market right now,” Summers said.
Summers has repeatedly warned the Biden administration since November of the danger of inflation to the country. As early as December, Summers suggested that the Biden administration had crossed the point of preventing a recession.
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“I think there is pain coming. That’s what happens when you borrow a lot in order to spend more, but I think the important thing to remember is that we’ve been in a lot of pain because of inflation. Prices have gone up 4% faster or 4% a year,” Summers said. of wages over the past 12 months. And this kind of thing will continue unless we do what is necessary to bring down inflation.”
He also put forward some solutions such as eliminating tariffs and reducing the budget deficit, criticizing claims that the rate of inflation is unpredictable.
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“Printing money and distributing it long enough before goods are introduced is a recipe for inflation, and that’s what we did. We pumped enough money into the economy to make total spending grow 11.6% last year. When you have 11.6 growth rate in spending, then according to any A reasonable theory of how much capacity is available, you’d have quite a bit of inflation, and that’s what we did.”