Stocks continued to tank Wednesday as bond yields soared, implying yet more inflation ahead. Meanwhile, Treasury Secretary Janet Yellen says she’s very sorry (but):
“I was wrong [a year ago] about the path that inflation would take,” she told CNN on Tuesday. Then came the excuses: “There have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t at the time fully understand.”
That is, she’s still not admitting that President Joe Biden’s $1.9 trillion spring 2021 “COVID relief” package was all too likely to spark soaring inflation. She’s pinning the blame on those “unanticipated” shocks.
Yet former Treasury chief Larry Summers (along with some other top Democratic economists) was warning that dumping all that cash into a US economy already recovering from COVID (growth was 1.7% in the last quarter of 2020) risked bringing back inflation unseen since the early ’80s.
Yellen simply didn’t want to see it. Indeed, at her January 2021 confirmation hearing, she insisted: “Right now, with interest rates at historic lows, the smartest thing we can do is act big” and pass Biden’s $1.9 trillion spending spree.
Yet she soon expressed some doubts. In May of that year, as Charles Gasparino noted then, she said at a conference one morning: “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat.” But then the White House clearly reined her in. At another conference that same day, she insisted she didn’t “think there’s going to be an inflationary problem.”
Instead, she (along with Fed chief Jerome Powell) blew off already-rising inflation as “transitory,” a tune they kept singing for months as Yellen spoke up in favor of Biden’s “Build Back Better” plan to add $5 trillion more in new spending.
It wasn’t ’til late in 2021 that they retired “transitory.” And even now, Yellen’s pleading those “unanticipated” surprises.
Yes, Treasury secretaries are supposed to toe the president’s line, and Yellen’s boss was eager to spend, spend, spend. But she put all her prestige as a former Fed chief behind the message that Biden’s plans were great.
Worse, the administration still has no plans for dealing with inflation except to say that fixing it is the Fed’s job, while the prez only offers recycled parts of his BBB plans, albeit now pitched as steps to “make things more affordable for families.”
Biden is shameless, of course. But so is Yellen.