Larry Summers says the rest of the world will 'suffer a lot' if the US doesn't get inflation under control and rates keep rising
Former Treasury Secretary Lawrence H. Summers believes the rest of the world will suffer greatly if the United States fails to control inflation and rates end up rising way above current levels, much like how things were in the early 1980s.
Quoting his Washington Post column, Summers tweeted that even recent rate and dollar hikes and geopolitical dislocations are creating serious problems for many developing countries. "The United States should lead global efforts to resolve sovereign debt issues more quickly and catalyze higher lending levels from the International Monetary Fund and the World Bank," he said in his tweet.
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The former treasury secretary claimed a soft landing could be much harder than expected. Even the markets seem to be pricing in this fact given that the long-awaited “Santa Claus” rally has yet to surface. US markets closed on Tuesday, ending a four-day losing streak. The SPDR S&P 500 ETF Trust SPY closed up 0.14% while the Vanguard Total Bond Market Index Fund ETF BND lost 0.66%.
"Managing inflation and recession risk in a way that ensures a soft landing is probably not possible. But managing these risks with max. care is extremely important as foundation for long-term investment policies that will lead to the inclusive prosperity most Americans desire,” Summers tweeted.
On the hawks: Summers said that the hawks who suggest the Federal Reserve should keep raising rates until they significantly outpace past inflation overlook the fact that the inflation is falling - let alone the possibility that the economy could face a "Wile E. Coyote Moment" in 2023, during which demand collapses.
"It could come as small and medium-sized businesses hit a wall of high-interest refinancing, as markets suddenly focus on what a recession would do to corporate profits as consumer savings in the age of COVID are depleted or as businesses that have been hanging on to their workforces realize they are no longer needed,” he tweeted. /p>
Read more:Tesla, Amazon, Nike, FedEx, Verona Pharma: Why these 5 stocks are grabbing the attention of investors today
Photo: World Economic Forum via Wikimedia Commons
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Former Treasury Secretary Lawrence H. Summers believes the rest of the world will suffer greatly if the United States fails to control inflation and rates end up rising way above current levels, much like how things were in the early 1980s.
Quoting his Washington Post column, Summers tweeted that even recent rate and dollar hikes and geopolitical dislocations are creating serious problems for many developing countries. "The United States should lead global efforts to resolve sovereign debt issues more quickly and catalyze higher lending levels from the International Monetary Fund and the World Bank," he said in his tweet.
Also read: How to invest in startups
The former treasury secretary claimed a soft landing could be much harder than expected. Even the markets seem to be pricing in this fact given that the long-awaited “Santa Claus” rally has yet to surface. US markets closed on Tuesday, ending a four-day losing streak. The SPDR S&P 500 ETF Trust SPY closed up 0.14% while the Vanguard Total Bond Market Index Fund ETF BND lost 0.66%.
"Managing inflation and recession risk in a way that ensures a soft landing is probably not possible. But managing these risks with max. care is extremely important as foundation for long-term investment policies that will lead to the inclusive prosperity most Americans desire,” Summers tweeted.
On the hawks: Summers said that the hawks who suggest the Federal Reserve should keep raising rates until they significantly outpace past inflation overlook the fact that the inflation is falling - let alone the possibility that the economy could face a "Wile E. Coyote Moment" in 2023, during which demand collapses.
"It could come as small and medium-sized businesses hit a wall of high-interest refinancing, as markets suddenly focus on what a recession would do to corporate profits as consumer savings in the age of COVID are depleted or as businesses that have been hanging on to their workforces realize they are no longer needed,” he tweeted. /p>
Read more:Tesla, Amazon, Nike, FedEx, Verona Pharma: Why these 5 stocks are grabbing the attention of investors today
Photo: World Economic Forum via Wikimedia Commons
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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