WATCH: Former Obama Economist Larry Summers Warns US Heading for Economic ‘Collision’

February 21st, 2023 11:01 AM

Former President Barack Obama’s National Economic Council Director sounded the alarm on the Federal Reserve’s inability to tame inflation and warned about “a collision or crash down the road.”

Economist Larry Summers warned the public in a Saturday interview with Bloomberg TV that the Fed’s interest rate hikes aren’t enough to cool inflation, yet he advised against hitting the brakes too hard. “The Fed’s been trying to put the brakes on and it doesn’t look like the brakes are getting much traction,” Summers said. “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,” he continued. 


He analyzed the problem is a demand-heavy economy: 

“We clearly have an economy where demand is super strong. The highest ratio of vacancies to unemployment we’ve ever seen, retail sales on fire. The economy [is] creating jobs faster right now than population growth by a factor of five in the latest month.”

Business Insider reported that the current strength of the labor market and higher-than-expected retail sales are raising concerns among investors who expect the Fed to counteract the demand with even higher rates. Summers’ latest red flags come after his prediction that President Joe Biden’s gargantuan $1.9 trillion stimulus monstrosity would stoke an inflation crisis by artificially boosting demand turned out to be right on target.

“The risk is that we’re going to hit the brakes very, very hard, and then when we hit the brakes very hard, that’s going to kick in at the same time that some of those negative cyclical dynamics about rising savings and excess inventory and so forth are kicking in.” He added that “the danger is drop off.”

January’s 6.4% inflation rate came in worse than expected, according to Business Insider. Sinem Buber, lead economist at ZipRecruiter, told Business Insider that “‘it could be a rocky road from here.’”

Conservatives are under attack. Contact ABC News (818) 460-7477, CBS News (212) 975-3247 and NBC News (212) 664-6192 and demand they report the truth on how inflation is devastating America’s economy.