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Former US Treasury Secretary Lawrence Summers strongly condemned the Fed’s loose monetary policy, accused the central bank of creating “dangerous complacency” in the financial market and misunderstood the dollar. economic.
Summers’ speech at a conference hosted by the Federal Reserve Bank of Atlanta marked that his attack on the U.S. Central Bank had greatly escalated. Harvard University economists and former senior advisers to the Democratic president have criticized Joe Biden’s views. Fiscal stimulus As a result of the excessive excess earlier this year.
Summers said that monetary and fiscal policymakers “significantly underestimated financial stability and traditional risks. inflation Persistent extremely low interest rates”.
The Fed has vowed to keep US interest rates close to zero until the economic recovery reaches certain milestones, including full employment, and the peak inflation rate is expected to be temporary. The latest median forecast by central bank officials shows that the lowest interest rate will be maintained until at least 2024.
“Policy forecasts indicate that the tax rate may not increase.” . Summers said that nearly three years will create dangerous complacency. Summers added that the Fed may be forced to tighten monetary policy, which will frighten the market and even harm the real economy.
“These adjustments are surprising when I think it is very likely that policy adjustments will be needed.” Summers warned that such “shocks” would “cause real damage to financial stability and may cause real damage to the economy.” .
This Federal Reserve There was a view that, compared with the pre-pandemic level, due to the slowdown in economic recovery and the risk of job shortages, it is still necessary to provide strong monetary support to the economy. It also does not want the current surge in consumer prices to continue, on the grounds that the bottleneck in the supply chain and the reopening of the economy have exacerbated the rise in consumer prices.
Summers warned that the notion of maintaining a balance between inflation and deflation risks, and between financial bubbles and credit problems, “is far from a correct understanding of economic conditions.”
“The main risks today include overheating, rising asset prices and subsequent financial over-leveraging and subsequent financial instability. There will be no economic recession, excessive unemployment and excessive sluggishness,” Summers said.
He added: “Today’s assertion in the contemporary American economy that the weakness of the labor market is a major problem is untenable.” “Go outside: Labor shortage It is a common phenomenon. ”
Summers’ attacks on American economic policymakers this year were particularly painful because he was a Democrat, which led to him becoming harsh criticism Within the party. Liberals in particular said he was out of touch with the struggle of low- and middle-income families.
They said that Summers (who served as Treasury Secretary from 1999 to 2001) represents the market-friendly, anti-deficit struggle of the Democratic Party’s friendly economic system. During Barack Obama’s administration, he supported excessively austerity fiscal policies, which led to the stagnation of the middle class and resistance to globalization.
None of this prevented Summers from taking a very public position. He said on Tuesday that the Fed’s new policy framework is not suitable for the current environment, which was approved in August last year to absorb more inflation after the financial crisis.
Summers said: “In a world where budget stimulus measures have expanded the budget deficit by 15%, the policy’s position is unreasonable.” “I would rather see us return to the Fed’s position of focusing on preemptive strikes, rather than Back to the Fed’s position. [that] Worry about preemptive worry, it will worry about inflation. ”
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