It's Larry Summers' world

I HAVE written a few columns on Larry Summers and Paul Krugman, and I am a great admirer of both distinguished and multi-award-winning economists given their intellectual rigor, depth, clarity of thought and accuracy. I am not going to repeat what I previously wrote, but for those who wish to look it up, they were published here on March 25, April 1, and July 22, 2022. Those articles also get into their impressive credentials and prominent economic forecasts, most of which they got right. Where they diverged late last year and early this year was on inflation. How much was coming, what was needed to deal with it, and now after it did come and stay longer, what will happen next, and what is needed to bring it down to acceptable levels were what they disagreed on.

The hawkish and tough prescriptions came from Larry Summers. Ahead of others and against the forecasts of most central banks (including the Federal Reserve), finance ministers and secretaries and most center and left economists (he dismisses the crackpot right, a view I share), Summers warned about inflation being higher and more entrenched and that taking care of it is likely to lead to a recession albeit one that is likely to be mild rather than severe. To reiterate, he made this call late last year and has been lauded for the gutsy and against consensus call that was against not just what the debt markets were pricing, but what the Federal Reserve was predicting and prescribing (and please note Fed chairman Powell was a Trump appointee who was renominated by President Biden and a Republican). He has been taking a well-deserved victory lap since then and had continued with his balanced but very cautious analysis and outlook.