Why Larry Summers Thinks We Need Massive Unemployment to Beat Inflation

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Why Larry Summers Thinks We Need Massive Unemployment to Beat Inflation
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Summers' argument is controversial, but not exactly crazy.

.” That’s how much extra unemployment is needed to reduce inflation by 1 percentage point.

You might notice that both of these concepts—NAIRU and the sacrifice ratio—involve the labor market. That’s not an accident; for most of the past four decades, economists have basically thought about inflation as an outgrowth of the unemployment rate.

Powell, for his part, has said that he does not want to “induce a recession.” But the Fed has already begun to, and he has said he will do more or less whatever it takes to bring inflation back down to normal. He has also implied that he wouldn’t go out of his way to avoid a recession if that’s what was required. Notably, when AOC

the Fed chair at a recent hearing what he thought of Summers’ forecast, he didn’t exactly dismiss it out of hand.

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