- 08 May 2021 15:06
#15171445
"But will this lead to inflation? Way back in 2009 some of us argued, in vain, that there was much less risk in going too big than in going too small, because if the stimulus turned out to be bigger than needed the Fed could always tap the brakes
A more explicit critique comes from Larry Summers, who has warned that the stimulus may lead to stagflation. He appears to believe that the Fed can’t use monetary tightening to offset overheating generated by fiscal expansion without causing a nasty recession. But I have to admit to being a bit puzzled about why. Indeed, the Fed has done that in the past: in the 80s and again in the 90s it acted to rein in booms without causing recessions.
So even if you’re uncomfortable with President Biden’s fiscal policies, you should be very cautious about making arguments against them that rely on novel propositions about why inflation can’t be contained. Conventional analysis says what Janet Yellen said: If the stimulus proves bigger than needed, the Fed can keep things under control. If you’re asserting otherwise, think hard about why you’re saying that."
https://www.nytimes.com/2021/05/07/opinion/federal-reserve-janet-yellen-inflation.html?action=click&module=Opinion&pgtype=Homepage
A more explicit critique comes from Larry Summers, who has warned that the stimulus may lead to stagflation. He appears to believe that the Fed can’t use monetary tightening to offset overheating generated by fiscal expansion without causing a nasty recession. But I have to admit to being a bit puzzled about why. Indeed, the Fed has done that in the past: in the 80s and again in the 90s it acted to rein in booms without causing recessions.
So even if you’re uncomfortable with President Biden’s fiscal policies, you should be very cautious about making arguments against them that rely on novel propositions about why inflation can’t be contained. Conventional analysis says what Janet Yellen said: If the stimulus proves bigger than needed, the Fed can keep things under control. If you’re asserting otherwise, think hard about why you’re saying that."
https://www.nytimes.com/2021/05/07/opinion/federal-reserve-janet-yellen-inflation.html?action=click&module=Opinion&pgtype=Homepage
Facts have a well known liberal bias