Professor of Economics at Harvard University and former International Monetary Fund Chief Economist Ken Rogoff appeared on CNBC’s “The Closing Bell” to discuss the current state of the economy and whether Biden and the Federal Reserve hacks will continue on with an anti-inflation strategy or if, worried about the results they’ve seen so far, they will instead “blink” and back off of anti-inflationary policies for fear of harming the economy.
In Rogoff’s view, the latter is the case: Fed Chair Jerome Powell and Team Biden, in his view, are doing too much too quickly to end inflation because they had made too many mistakes in the past that now need correcting. That overreaction, or at least overly speedy reaction, will, in his view, cause them to “blink” and back off before the job is done.
Speaking on that, Rogoff said:
“I mean, it’s a very odd mix of having the employment report good and the growth be negative. Everything after the pandemic’s very odd. I think the question about will we have a recession is how easily will they get inflation down.
“And I’m worried that the Fed, they’re talking tough, I suspect they’ll blink, but I’m worried that, having made some big mistakes, the Biden administration made big mistakes and the Fed made big mistakes, and I’d say a lot of academic economists supported what they were doing and had it wrong, they’re in danger of making a big mistake in the other direction and overshooting and trying to bring it down too quickly.”
Rogoff made much the same point when he appeared on CNN to discuss the same situation, saying that he thought the Fed would blink because it will be almost impossible to break the back of inflation without also plunging the economy into recession, saying:
“[The Fed] would have to be very lucky. They have to decide: Do they have to have inflation get down quickly, or are they going to throw us into a recession? I think they are saying that they will get inflation down. I think they will blink.”
Continuing, Rogoff went on to add that the reason for the current problem is that low rates goosed the economy for too long, keeping the gas pedal pressed firmly to the metal for far too long, leading to inflation that can only be quickly dealt with with a recession, saying:
“I don’t think this had to happen. We stepped on the gas pedal for too long and it was too much stimulus too late. I am sympathetic to all the goals, but the stimulus, they kept on going too long and they didn’t calibrate it.”
Adding to that, Rogoff said that, in his view, it would be better for inflation to stat high for a few years than for the Fed to create a recession, saying:
“I think personally they should take it easy and let inflation stay high a few years and go slow. There is no easy way out.”
This story syndicated with permission from Will, Author at Trending Politics
Notice: This article may contain commentary that reflects the author's opinion.
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