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Larry Summers' view: What caused US inflation and how to slow it down
Ian Bremmer interviews economist Larry Summers on GZERO World. Summers served as the Treasury Secretary under President Clinton and as the Director of the National Economic Council under Preisdent Obama. He sounded the alarm bell about inflation back in February 2021 when few people were talking about it. Part of the reason prices are rising so much today, Summers says, is because the Biden administration made the political decision to do "too much stimulus," a big mistake in his view. Summers discusses how supply chain problems are also contributed to the highest levels of inflation in the US in 30 years.
Watch this episode of GZERO World with Ian Bremmer: Inflation nation: What's driving US prices higher?
Subscribe to GZERO on YouTube to be the first to see new episodes of GZERO World with Ian Bremmer: https://bit.ly/2TxCVnY
Larry Summers: Rising inflation makes society feel "out of control”
The economic consequences of high inflation are already bad enough.
But for Larry Summers, sometimes the psychological trauma that comes with it can do even more damage to a society.
"A society where inflation is accelerating is a society that feels out of control."
When wages rise at the same rate as prices do, he says, they feel like inflation is robbing them of the fruits of their labor — even if rising prices is the main reason people are getting a raise in the first place.
"We all tend to internalize the good and externalize the bad."
To deal with inflation, the former US treasury secretary says the Federal Reserve must admit it misjudged the problem, and for President Joe Biden to acknowledge that too when he nominates people to the Fed board.
Watch this episode of GZERO World with Ian Bremmer: Inflation nation: What's driving US prices higher?
Subscribe to GZERO on YouTube to be the first to see new episodes of GZERO World with Ian Bremmer: https://bit.ly/2TxCVnY
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How did we get to today's supply chain mess?
The supply chain mess is hitting all of us. Inflation is now the highest it's been in over 30 years.
The costs of food, gas and housing are going through the roof. What's more, almost everything made outside of America is now in short supply — like semiconductors for our cars.
Why is this happening? A lot of it has to do with the pandemic. Asian factories had to shut down or thought there would be less demand for their stuff. So did shipping companies. But then online shopping surged, and now there's a lot of pent-up demand to spend all the cash we saved during COVID.
But it's not just the pandemic. Before COVID, companies kept limited inventories to save costs and fatten up profit margins. And now we're all suffering the consequences.
Watch this episode of GZERO World with Ian Bremmer: Inflation nation: What's driving US prices higher?
Subscribe to GZERO on YouTube to be the first to see new episodes of GZERO World with Ian Bremmer: https://bit.ly/2TxCVnY
The shipping container shortage that’s wreaking havoc on the global supply chain
Spare a thought for the poor shipping container, responsible for most of the world's trade. It's had a rough year that started with the gargantuan Ever Given getting stuck in the Suez Canal.
Now the Suez traffic jam has gone global.
When the pandemic started, everyone needed COVID supplies from China. Chinese factories couldn't keep up with soaring demand from Western nations, and empty containers started to pile up in faraway ports.
Sending one of these ships from Shanghai to Los Angeles has jumped more than ten-fold from $2,000 to $25,000.
And as demand increases even more, the problem is getting worse — a vicious cycle with no end in sight just as the holidays approach.
Watch this episode of GZERO World with Ian Bremmer: Inflation nation: What's driving US prices higher?
Subscribe to GZERO on YouTube to be the first to see new episodes of GZERO World with Ian Bremmer: https://bit.ly/2TxCVnY
How economist Larry Summers predicted US inflation
Back in February, Larry Summers was sounding the alarm bell about inflation when no one was talking about it.
"It seemed obvious to me that we were gonna have massive demand, and we weren't gonna have such large supply."
So why didn't anyone listen to him? Summers says that "cognitive biases" led many to ignore the inflation warning signs because they thought struggling families needed help, or believed that inflation was simply gone for good.
Part of the reason prices are rising so much today, Summers says, is because the Biden administration made the political decision to do "too much stimulus," a big mistake in his view.
Watch this episode of GZERO World with Ian Bremmer: Inflation nation: What's driving US prices higher?
Subscribe to GZERO on YouTube to be the first to see new episodes of GZERO World with Ian Bremmer: https://bit.ly/2TxCVnY
Inflation nation: What’s driving US prices higher?
As the holiday shopping season gets underway, consumers are facing empty shelves and sky-high prices. What explains the supply chain crunch and how is it related to the highest levels of inflation in the US in 30 years? Ian Bremmer is joined by economist Larry Summers, who served as the Treasury Secretary under President Clinton and as the Director of the National Economic Council under Barack Obama. Also on this episode of GZERO World with Ian Bremmer: the plight of the lowly shipping container.
- Think buying American will help ease inflation? Larry Summers says ... ›
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- How long will COVID-fueled inflation last? - GZERO Media ›
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