Former Federal Reserve Chairman Ben Bernanke has issued a warning that the Biden administration has the American economy headed toward another great “stagflation” not seen since the 1970s.
Stagflation is the condition defined by economists as a period of contracting national economic growth in addition to high inflation and flat or rising unemployment.
Bernanke, who served at the Fed during the George W. Bush and Obama administrations, said that the U.S. economy is likely to experience a “year or two” of low growth, unemployment “at least up a little bit,” and continuing high consumer price inflation.
He told reporters that situation is probable “even under the benign scenario.” By that he means the hopeful case where current Fed Chairman Jerome Powell will be able to slow inflation by bumping up interest rates without slowing the economy into a full-blown recession.
Bernanke has also questioned other Biden fiscal proposals like student loan forgiveness. He described that plan as “very unfair,” as it favors college graduates and professionals over lower-income taxpayers.
He also said rising housing prices are possibly creating a bubble like the one seen in the 2008 financial crisis. He said he is hopeful in that regard because the mortgages in place nationwide are more secure than the ones that led to the 2008 problems.
Other former Obama officials have been issuing warnings as well. Former economic advisor to Obama Steven Rattner has described the surging price increases across all industries as “Biden’s inflation.” Obama-era National Economic Council director Lawrence Summers has said for at least the last year that the American Rescue Plan and other massive federal spending will lead to continuing inflation.
People who are old enough to remember the 1970s have some justifiable concerns about the way current conditions are reminiscent of those difficult times. Surging consumer prices and fears of inflated asset valuations are not a good recipe for economic growth and investment.
The progressive idealogues in charge of the Biden administration will not be able to hand-wave true stagflation away with lame press conferences and empty promises. Americans can hope that they will be able to endure the coming economic troubles until a new administration with sound economic ideas is put in place.