Former Obama economic adviser Larry Summers warns of ‘very high probability’ of recession

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The possibility of a recession has become even more likely, former Treasury Secretary Larry Summers said on Sunday.

On CNN’s “Fareed Zakaria GPS,” Zakaria spoke with Summers about the upcoming release of second-quarter U.S. GDP data next week. With first-quarter GDP showing economic contraction, he asked Summers if he thought there was a possibility of a recession.

“I think there’s a very high probability of recession. When we’ve been in this kind of situation before, recession has basically always followed. When inflation has been high and unemployment low, soft landings represent kind of a triumph of hope over experience. I think it’s very unlikely we’ll see one,” Summers said.

A recession occurs when the US economy experiences two consecutive quarters of contraction. Following reports that inflation hit a new rate of 9.1%, the highest in decades, fears that the country is in a recession have reignited.

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President Biden has said he is not worried about a recession.

President Biden has said he is not worried about a recession.
(Getty Pictures)

Summers, who served as director of the National Economic Council during the Obama administration, was also pessimistic about the ability to moderate inflation

“Whether or not we put inflation back completely in the bottle with this recession, I think is very difficult to judge at this stage. I was encouraged by the commitment of the federal authorities to do so, but to other central banks at other times have professed to be engaged, but have not done enough once the economy has pulled back to guarantee a substantial drop in inflation, so I think there is also a greater risk of stagflation and that this episode has been with us for a number of years than the market is currently discounted,” Summers said.

Summers has consistently warned the Biden administration since November of the threat inflation poses to the country. As early as December, Summers suggested the Biden administration was past the point of preventing a recession.

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Seventy-three percent of voters disapprove of the Democrats' handling of inflation.

Seventy-three percent of voters disapprove of the Democrats’ handling of inflation.
(Stock)

“I think there’s pain ahead. That’s what happens when you borrow too much to spend too much, but I think the important thing to remember is that we’ve had a lot of pain because of the inflation. We’ve had prices that have risen 3% or 4% a year more than wages over the last 12 months. This stuff will continue unless we do what is necessary to bring inflation down. inflation,” Summers said.

He also offered solutions such as abolishing tariffs and reducing the budget deficit, criticizing claims that the rate of inflation could not be predicted.

Inflation hit its highest level in 40 years in June.

Inflation hit its highest level in 40 years in June.
(Stock)

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“Printing money and distributing it long before the supply of goods is a prescription for inflation, and that’s what we did. We injected enough money into the economy to grow spending at a rate of 11.6% last year When you have 11.6% growth rate of spending, then on any reasonable theory of available capacity you’ll have a lot of inflation, and that’s what we did,” Summers said.

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