It may not be quite hyperinflation - loosely defined as pricing rising at a double-digit clip or higher - but if former Treasury Secretary and erstwhile democrat Larry Summers is right, it will be halfway there in about six months.
One day after Bank of America warned that the coming "hyperinflation" will last at least 2 and as much as 4 years - whether or not one defines that as transitory depends on whether one has a Federal Reserve charge card to fund all purchases in the next 4 years - Larry Summers, who is this close from being excommunicated from the Democrat party, predicted inflation will be running “pretty close” to 5% at the end of this year and that bond yields will rise as a result over the rest of 2021.
Considering that consumer prices already jumped 5% in May from the previous year, his forecast is not much of a shock.
Speaking on Bloomberg TV, Summers said that “my guess is that at the end of the year inflation will, for this year, come out pretty close to 5%,” adding that “it would surprise me if we had 5% inflation with no effect on inflation expectations.” If he is right, the recent reversal in one-year inflation expectations which dipped from 4.6% to 4.2% according to the latest UMich consumer sentiment survey, is about to surge to new secular highs.
This is not the first time Summers has predicted that the firehose of fiscal and monetary stimulus will unleash soaring inflation. While career economists at the White House and Fed - who have peasants doing their purchases for them - urge Americans to ignore the current hyperinflation episode, saying that the recent inflation surge will soon pass, Summers has been unique among his fellow Democrats in predicting that massive monetary and fiscal stimulus alongside the reopening of the economy would spark considerable price pressures.
Asked how financial markets may behave in the rest of 2021, Summers said “there will probably be more turbulence” as traders react to faster inflation by pushing up bond yields. “We’ve got a lot of processing ahead of us in markets,” he said.
Ironically, Summers - who now teaches at Harvard University whose president he was not too long ago when he hung out with his buddy Jeffrey Epstein...
... also praised President Joe Biden’s tentative deal with a bipartisan group senators on a $579 billion infrastructure plan (which has virutally no chance of passing) and echoed the White House’s call for even more to be spent on “human infrastructure.”
“There is a lot that is left to do that should be supported,” Summers said. “The investment will strengthen our economy.”
Treasury Secretary Janet Yellen told lawmakers this week that she expected annual inflation to be below that level by the end of this year.
Putting the stimulus tsunami in context, on Friday Bank of America's Michael Hartnett calculated that with the latest $600BN Biden infrastructure plan, the running tally of global monetary & fiscal stimulus rises to $30.5 trillion in the past 15 months, an amount equivalent to entire Chinese & European GDP’s.