Cold Winter of Recession is Coming, Clinton Treasury Secretary Summers Says

The former Treasury secretary, World Bank chief economist, and National Economic Council director has repeatedly aired gripes over Washington’s fiscal and monetary policy, warning in 2021 that the trillions pumped into the economy during COVID and the hundreds of billions more added through President Biden’s spending agenda might cause a calamity.

The United States will be almost certain to fall into a recession sometime in the next two years, former Treasury Secretary Larry Summers has said.

“I think that when inflation is as high as it is right now and unemployment is as low as it is right now, it’s almost always been followed within two years by recession. I look at what’s happening in the stock and bond markets. I look at what consumer sentiment is. I think there is certainly a risk of recession in the next year, and I think given where we’ve gotten to, it’s more likely than not that we’ll have a recession within the next two years”, Summers said, speaking to CNN’s State of the Union on Sunday.

“I think the optimists were wrong a year ago in saying we’d have no inflation, and I think they’re wrong now if anyone’s highly confident that we’re going to avoid recession”, he added, referring to Treasury Secretary Janet Yellen’s assurances Thursday that no recession was forthcoming.

Yellen faced criticism earlier this week after admitting that she had been wrong in calling the inflation eating away at Americans’ wallets as “transitory”.

“I do expect inflation to remain high although I very much hope that it will be coming down now”, Yellen said in a briefing of the Senate Finance Committee. “I think that bringing inflation down should be our number one priority”, she added.

The inflation rate jumped to 8.6 percent in May – its highest rate since 1981, according to Department of Labour data released Friday. Gathering a press conference to discuss the troubling data, President Joe Biden blamed his Russian counterpart Vladimir Putin and the latter's alleged “tax on both food and gas” via the crisis in Ukraine. On Saturday, Biden appeared to blame Kiev as well, saying soaring gas prices at the pump and inflation were a “by-product” of the tens of billions in assistance that the US has committed to the Eastern European country.

“…the by-product – and I said at the time, when we decided we were going to help Ukraine, the point I was making was that it’s going to cost us too. It’s going to cost the Western countries. It’s going to cost NATO. It’s going to cost the European countries and cost us. Because you know what was going to happen: the cost of gasoline and oil was going to go up, and the cost of food was going to go up”, Biden explained at a meeting of the Democratic National Committee.

The Russian president has dismissed efforts by US and European politicians to blame him for their countries' economic woes, saying earlier this year that “the truth is that the current problems that millions of people in the West face are the result of many actions by the ruling elites of their states, their mistakes, myopia, and ambitions”.

Summers, who served as Bill Clinton’s Treasury secretary between 1999 and 2001, and as Barack Obama’s National Economic Council director between 2009 and 2011, has spent the past year reprimanding the Trump and Biden White Houses, and Congress, over their “irresponsible” macroeconomic policies of pumping trillions of dollars in new money into the economy.

“The full stimulus that was contemplated has passed…The Fed has stuck to its guns on no rate hikes for years and years and is continuing to grow its balance sheet. So it seems to me that what was kindling is now igniting, and I am much more worried that we’ll have either inflation or we will have a pretty dramatic fiscal-monetary collision”, Summers said in March 2021, referencing the $6+ trillion injected into the economy during COVID.

In December, he elaborated on his warnings, saying that the government had “put in motion for the first time in 40 years, excessive inflation, caused by overheating of the economy, and that’s going to have to be worked out of the system and that’s probably not going to be such an easy thing”.