Former Obama adviser says inflation cannot be cured even in recession

There is growing talk that the Federal Reserve’s rate hike will cause a recession in the United States next year, but even the recession caused by the central bank may not be enough to curb inflation.

It is one of the few political leftists who was the former chairman of President Obama’s Council of Economic Advisers and warned about the consequences of inflation in President Biden’s financial stimulus, which was introduced last year to help the economy recover from the coronavirus pandemic. According to one of them, Jason Furman.

Talking to Market Watch, a bystander at the World Economic Forum in Davos, Ferman said a concept called sacrifice measures how many years of unemployment will reduce inflation by a percentage point. And in the 25 years before the pandemic, the sacrifice rate was 6 percentage points. This means that you need to knock down for a year when the unemployment rate rises by 6 percentage points or for two years when the unemployment rate rises by 3 percentage points. Full percent point inflation.

Mr Ferman also said that expecting inflation to settle at normal rates after one bad spell may be unrealistic for the market. For example, in the 1970s there were some inflation surges. The market also misunderstands how aggressive the Fed needs to be, as it predicts that the Fed’s final interest rate will exceed 4%.

“I saw the Treasury for 10 years
I think it’s shocking, “Ferman said. “The yield is basically saying that we don’t think the Fed will exceed 4%, and we think it will actually go down. [afterwards] calm down. And that’s the only way to understand it, “he said. Mr Ferman said his view of the 10-year Treasury, like the Nasdaq Composite, would pose additional risks to technology stocks that have already been hit.

It fell 29% from the peak.

The U.S. Senate confirms Fed Chair Jerome Powell for the second term, even though Powell said it was about six months too late to pivot to fight inflation. Said that was correct. Powell will do a “spectacular” job in 2019, and his fire extinguishing efforts in the event of COVID-19 are also commendable. And Mr. Biden said the Biden administration should recognize the hands-off approach to the Fed and the quality of the nominated candidates.

Ferman participated in World Economic Forum Events on the US Economy It was put aside by lively discussions about cryptocurrencies. Ferman believes that the value of cryptocurrencies “is not well above zero.” “There is no reason to expect high returns indefinitely for something whose supply is endless,” he said. He also said it was not surprising that cryptocurrencies proved to be a terrible inflation hedge.

The panel’s general view, including Nasdaq CEO Adena Friedman, Senator Pat Toomey, and PayPal CEO Dan Schulman, is that the U.S. economy escapes recession despite rising inflation. It was supposed to be. He says there is a possibility of a recession, but Mr. Ferman said he expects higher-trend employment growth and lower-trend economic growth as productivity normalizes.

The CEO, Ferman is talking about, is talking about the employment market rather than inflation. As the wages of less skilled workers are rising aggressively, some executives are considering hiring more skilled workers and giving them a wider range of jobs.

“I don’t think we have a lot of resignations, and I think we can count on them. People deal with different types of jobs, different wages, and different benefits.” Mr. Ferman said. He also points out that finding future employers using tools such as Zoom has made it much easier for employees to interview other positions.

He said the Biden administration’s policy of postponing student loans probably increased inflation by a few tenths, but lowering China’s tariffs could halve them. But after the Biden team’s “original sin” to support the second fiscal stimulus last year, he had no hope. “If I were in the White House now, I would tell the people in the message whatever the message we create. We have to be aware of two facts that are true,” he said. One is that inflation remains high, and the other is that it really affects the Americans who work. “I don’t think there’s a great message. The only great message is when inflation actually goes down,” he said.

Former Obama adviser says inflation cannot be cured even in recession

Source link Former Obama adviser says inflation cannot be cured even in recession

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