Inflation is currently “much more than a moderate overrun” of the Fed’s target of 2%, he said earlier this week. “I certainly would not consider a repeat show a political success,” he continued.
Larry Summers, an economist who served in both the Obama and Clinton administrations, has sounded the alarm about inflation for several months.
But not everyone thinks the Fed and Biden administration needs to change course dramatically. In fact, former Fed economist Claudia Sahm, a Summers critic, believes the U.S. economy still needs trillions of dollars in additional stimulus.
I asked her a few questions about this week’s inflation data and the ensuing debate. Our Q&A has been condensed and easily edited for the sake of clarity.
What do you think is the overall picture of the latest inflation data?
Large price increases in October, on top of higher than normal inflation since the summer, are unequivocally bad for consumers. But Covid, not inflation, is the problem. The rise and fall of cases throughout the pandemic has created enormous disruption to our economic and everyday lives.
What does an annual increase of 6.2% in the consumer price index say about the narrative that inflation is temporary?
The view that inflation would fall back this year was always based on the view that the pandemic would subside. Covid is still here, and as recently as a few months ago, it rose due to the Delta variant. Global supply chains are a mess, mainly due to an inadequate global health response. There is no evidence that price increases due to Covid-related factors are spreading to other prices. Transient means short-lived. As with the pandemic itself, we have been promised that it would get better soon, and it will take longer.
A number of other economists cite rising rents as an example of price increases spreading. Do you disagree with this assessment?
I disagree. Housing prices rose more slowly than usual during the pandemic due to eviction moratoriums, adherence to mortgages and people waiting to move. The faster inflation in house prices now is basically a “getting back to normal.” The normal is not good, but that’s what we had before Covid.
Should the Fed keep the course? Or maybe it needs to move faster?
The Fed decided to reduce the pace of asset purchases by $ 15 billion in November and December and then reconsider at their next meeting. The world is changing fast and it is fitting for them to get more data before deciding on the pace then.
What should be the response in Congress and / or from the Biden administration? What are the implications of Biden’s $ 1.9 trillion Build Back Better Social Expenditure Package?
Congress must pass the Build Back Better legislation immediately. It is an investment in our children, low-wage workers, education, health care and the fight against climate change. Half a year of higher than normal inflation is not a reason to waste this opportunity to trade.
Two more large companies want to split up
This week may mark the end of an era of more than one iconic conglomerate.
The proposal follows a campaign by activist shareholders and a strategic review in the wake of a corporate governance scandal.
“The decision enables each company to significantly increase its focus and facilitate more agile decision-making and slimmer cost structures,” the statement said.
The move by the 146-year-old conglomerate comes days after General Electric said it would split into three separate public companies that sprang up its aviation, healthcare and energy companies.
Step back: What makes these great conglomerates try to stand out? One factor is the market, which currently favors streamlined operations over vast empires.
Another is the role of more aggressive activist shareholders, who build ownership and then lobby for companies to make major structural changes.
North American companies are racing to order robots
Those companies that are in a hurry to meet the growing demand for goods while struggling to fill vacancies are in a pinch. Increasingly, they are turning to a new solution.
According to the Association for Advancing Automation, or A3, strong sales of robots over the summer have brought the total number of orders in North America to 29,000 units so far this year. It is the highest level ever.
Degradation: The number of units sold has increased 37% compared to the same period in 2020 and trumps the previous high in 2017 by almost 6%.
“With labor shortages across production, logistics, and virtually every industry, companies of all sizes are increasingly turning to robotics and automation to remain productive and competitive,” A3 President Jeff Burnstein said in a statement.
The group said it was not just carmakers that placed orders. Nearly two-thirds of sales came from the non-automotive industry, including metals and food and consumer goods.
Warby Parker reports results before US markets open.
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