Larry Summers Says the US Needs Much Higher Unemployment to Break Inflation – By Michael Rainey (The Fiscal Times) / June 21, 2022
President Biden downplayed the likelihood of a recession in an interview with the Associated Press last week, and he repeated the point over the holiday weekend, citing a notable former Treasury Secretary for support.
“I was talking to Larry Summers this morning, and there’s nothing inevitable about a recession,” Biden told reporters Monday, referring to the prominent Democratic economist who served in both the Clinton and Obama administrations.
Summers, however, struck a very different note in a speech in London Monday, telling his audience that unemployment needs to rise sharply if the U.S. wants to get inflation under control. “We need five years of unemployment above 5% to contain inflation – in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment,” he said.
Currently, the unemployment rate is 3.6%, but many economists expect that number to creep higher as the Federal Reserve continues to raise interest rates and withdraw liquidity from the economy. But Summers is mulling something far more intense than Fed officials currently appear to have in mind.
