Speaking on Bloomberg’s Wall Street Week, Larry Summers, Harvard Professor, former Director of the National Economic Council, and Treasury Secretary under Bill Clinton, said that inflation will not get “close to target levels without introducing some real slack into the economy,” and that creating enough slack in the economy, “means a period of very high turbulence.”

Summers full statement was, “My view has been that inflation’s not going to come down to target levels or close to target levels without introducing some real slack into the economy, which means a period of very high turbulence. Whether that slack’s going to come because the Fed’s going to have to push interest rates very high or whether that slack’s going to come because of internal forces in the economy, inflation eroding people’s incomes, and so forth. That’s less clear to me. But I don’t think there’s a path to a low-inflation economy without a material period of economic slack. It could happen. But it’s not the dominant probability. What we saw today was a lot of strength, and that suggests more need for interest rate hikes. And that’s what was discounted into the market.”

It pays to look for statements which appear to have been poorly prepared, where people are speaking freely, without constraint. While statements like Jamie Dimon’s, or Elon Musk’s could have been prepared, statements like this sound like someone speaking extemporaneously of a mechanism they see, without the benefit of carefully crafting their statement to not trigger unwanted effects.

This is likely what a lot of the bigger players are actually seeing.

Photo of Lawrence Summers Courtesy of Wikipedia