Summers Sees Dangerous Policy Parallels With High-Inflation Era

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Former Treasury Secretary Lawrence Summers said there are worrying parallels between current-day U.S. economic and foreign policies and those of the 1960s and 1970s, although inflationary pressures aren’t quite as extreme as back then.

“I don’t think we’re anywhere close to the kind of Carter-era double-digit inflation, but I do think we’re in very serious danger of repeating almost all the mistakes of the 1960s and early 1970s,” Summers said Bloomberg Television’s “Wall Street Week” with David Westin.

 
Summers, a paid contributor to Bloomberg, identified the following parallels:

• The military withdrawals from Afghanistan in 2021 and Vietnam in the 1970s
• A White House trying to deliver progressive social and economic policies
• The increase of social protests
• A Federal Reserve increasingly talking of social objectives

He also spotted what he said was a “greater chorus of voices” characterizing accelerating inflation as the lesser of two evils -- to be left for dealing with later, when the economy recovers more fully.
 
“I see more and more economists starting to say “well if the inflation target moves from 2% to 3% that’ll be OK, we can’t risk doing anything that might hurt the economy,” Summers said. “That, I think, is setting ourselves up for some very substantial difficulties down the road.”

Next week’s consumer price index report is forecast to show a 0.4% advance in the CPI in August from the prior month and a 5.3% increase from August of 2020.

Summers’s Harvard University Professor Ken Rogoff recently wrote for Project Syndicate that “the long list of similarities between the 1970s and today is unsettling.” 

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