Former U.S. Treasury Secretary Summers criticized the Federal Reserve for misjudging inflation as a threat to the economy: officials just need to take to the streets

Former U.S. Treasury Secretary Larry Summers (Larry Summers) criticized the Federal Reserve’s accommodative monetary policy stance, misjudging inflation and the labor market, which could cause real harm to the U.S. economy.

Summers said Tuesday (May 18) at a conference discussion at the Atlanta Fed Bank that monetary and fiscal policymakers have greatly underestimated financial stability and the risks posed by long-term very low interest rates, and he slammed the Fed for the very dangerous self-righteous attitude it has developed over the past three years.

Summers said: “Policy forecasts suggesting that interest rates may not rise in the next three years are creating a dangerous complacency, and the Fed may be forced to subconsciously tighten monetary policy, which would panic markets and even harm the real economy. Such a shock would cause real damage to financial stability and possibly to the economy when the Fed urgently needs to adjust policy.”

“The major risks today include overheating, rising asset prices, and the resulting financial overleveraging that creates financial instability, not what the Fed calls fears of recession, excessive unemployment, and so on.” Summers added that “officials need only look on the street to know that labor shortages are widespread, employers in restaurants and other service-intensive industries, it is not easy to recruit employees, asserting that the current labor market weakness is untenable.”

Summers served as U.S. Treasury Secretary from 1999 to 2001. He represents the market-respecting wing of the Democratic Party, opposing the expansion of government deficits, and supporting the fiscal policy of living within one’s means during the Clinton and Obama administrations.

In addition, the “new debt king” called Gundlach (Jeffrey Gundlach) recently interviewed by Yahoo Finance, said that the Biden administration’s plan to tax the rich is a fundamental act of revenge, even if the rich tax, it is not possible to significantly increase the U.S. government tax revenue, but only to punish people with excellent earning power.

For the Biden administration’s plan to raise the capital gains tax rate, Gonzales believes that if the policy is implemented, it will constitute a big blow to the financial system.