The controversial issue of inflation: mistakes, lies and half-truths

Nobel Prize-winning economist Paul Krugman apologizes for underestimating inflation. Summers thinks we are close to a recession while Biden’s monetary policy is treading water.

Amid inflation, recession and tight monetary policies

On 13 July, CPI data came out that shocked everyone as it reached a level of 9.1%, when in fact it was expected to reach a maximum of 8.6% / 8.8%.

This figure has rightly worried a lot of analysts and investors who have put themselves on the spot both economically and with their own statements. 

Famous among them are the statements of Paul Krugman, economist and former Nobel laureate who, admitted his own faults about the issue by acknowledging that he had largely underestimated the situation.

In a recent article in the New York Times authored by Krugman, the Nobel laureate apologizes and admits that he was wrong about his forecasts, but goes further by assessing how 9.1% is the peak of inflation and that this is bound to be maintained and gradually decline if the Federal Reserve keeps the helm on the starboard side. 

In the article, the economist also names one of his emblazoned colleagues, former adviser to President Barak Obama, Larry Summers, who stated how a recession is plausible although not as imminent as analysts believe. 

Summers expressed himself this way at the Aspen Security Forum:

“The odds are probably better than half that a recession will start next year.

The economist also touched on the prices of crude oil and commodities and further highlighted the problems with ‘the geopolitical situation'”.

While pressing his team colleagues, Biden stated:

“I would like my friends in the administration to turn their attention to what they can do to reduce inflation rather than cling to the idea that this is something that has been done to them by fate. I think this will depend a lot on what happens outside the economic realm. It will also depend on how lucky and, you know, how clever the Federal Reserve turns out… They have a very, very difficult balance problem in defining monetary policy, given the situation we are in”.

President Joe Biden expresses great concern about the current general situation

As previously reported in an article in recent days, inflation has turned into the biggest concern and worst nightmare of the US presidency. 

Joe Biden recklessly had underestimated the CPI problem, first branding it as transient, then as a fallacious indicator of reality. The public however, is finding out firsthand and from their own wallets that this is not the case. 

To be fair, the latest data show that both employment and Americans’ spending trend figures are good, but if the second quarter GDP figure is negative at the end of the month, America will enter a technical recession. 

National Review, with Kevin A. Hasset, pointed out that Biden’s statements on the cost of living were a mountain of lies casting doubt even on the president’s notions of economics when:

“Biden even claims that two negative quarters in a row is not a recession”.

Also echoing this article are two columnists from The Hill EJ Antoni and Stephen Moore. 

In their article, the two list Biden’s top six lies about inflation that are causing such great concern both in the White House and among the American people and sarcastically conclude their piece thus:

“Perhaps none of these half-truths and outright lies should be too surprising: what should we expect from the administration that first denied inflation, then said inflation was transient, then claimed it was just a problem of high class?”

A real crossfire that doesn’t help the incumbent president, especially now that Trump has climbed strongly back to the top.