Ben Bernanke, who served as Federal Reserve Chairman under Presidents Bush and Obama, warns that the U.S. economy is headed for a repeat of 1970s “stagflation.” Economists refer to a period of low economic growth, high inflation, and rising unemployment as “stagflation.”
“Even under the benign scenario,” the U.S. is likely to go through “a period in the next year or two where growth is low, unemployment is at least up a little bit, and inflation is still high,” Bernanke told the New York Times. “So you could call that stagflation.”
That “benign scenario” is if current Fed chair Jerome Powell is able to cool inflation by raising interest rates without tipping the country into a recession.
Good luck with that, Jerry.
Bernanke is not the only Obama administration official to predict worsening inflation under Biden. Former Obama economic adviser Steven Rattner in March called rising costs “Biden’s inflation.” Former Treasury secretary Lawrence Summers, who served as Obama’s director of the National Economic Council, has warned for at least a year about Biden’s economic policies, blaming the president’s American Rescue Plan for skyrocketing inflation and blasting Biden’s plan to cancel student loans.
Bernanke also criticized Biden’s plan to cancel hundreds of billions of dollars in loans, calling the idea “very unfair.”
“Many of the people who have large amounts of student debt are professionals who are going to go on and make lots of money in their lifetime,” Bernanke said. “So why would we be favoring them over somebody who didn’t go to college, for example?”
Bernanke also expressed concern about the rapid rise in housing costs, fearing a 2008-style bubble. He told the Times that it was something that the Fed needs to keep an eye on.
The good news is that Mr. Bernanke isn’t worried about a 2008-style crisis. He is concerned about housing prices, saying they have “risen a lot, like 30 percent in the last two years.”
“That’s something that needs to be watched,” he said, but unlike in 2008, “the mortgages that are being lent to buy these houses are generally much higher quality than the subprime mortgages of 15 years ago.”
Those of us who lived through the 1970s are experiencing a troubling degree of déjà vu. The echoes from that period of time are reverberating throughout the country at gas pumps, at the grocery store, around kitchen tables, at bars, and any place where people gather.
We are in deep trouble, and we all know it. The nation is in the hands of a weak, befuddled president who is easily manipulated by the ignorant partisans around him. Most of them would rather see the GOP destroyed than the country saved.
The good news is that they can’t “spin” stagflation. And they won’t be able to blame anyone else.