Treasury Secretary Admits Inflation Blunder

People shop at a grocery store in New York City on May 31, 2022. (Samira Bouaou/The Epoch Times)

Commentary 

Clearly, I have a deep respect for economics and economists. However, there are times when economists are more like wayward weather presenters than trained economic analysts.

Ever so often, an economist is so far off-base that the economy suffers an attack and Americans take a hit, like damage from an unannounced storm. While the weather person can be fired, politically appointed economists are seldom held accountable, and they are rarely thrown out of office for mistakes.

That is why, in my opinion, economic schools of thought and professional outlooks regarding business economics are vitally important when choosing a nominee. When an economist or businessperson is nominated to a top economic position, depending on their beliefs and the economic dynamics of the time, there is a chance they will prevail. There is a corresponding risk that they will fail and seriously mess up the situation.

While it is rare that political appointees own up to mistakes, Treasury Secretary Janet Yellen has done just that. Last week, Yellen appeared on CNN’s “The Situation Room“ and told Wolf Blitzer that she had made a mistake. Yellen said, ”I think I was wrong then about the path that inflation would take.”

While there’s no doubt she was wrong, to hear her apologize is bittersweet. I appreciate her recognizing her mistakes, but I don’t appreciate the rapid inflation inflicted upon America.

Yellen continued, “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—didn’t fully understand, but we recognize that now.”

What Is She Talking About?

Remember when everyone was talking about inflation being transitory? In 2021, Yellen made a number of statements about inflation and how it only posed a small risk and wasn’t likely to be a problem. In various interviews, Yellen made many misstatements. Here are a few of her misguided comments:

From NPR’s “Morning Edition,“ Nov. 3, 2021: “I expect that next year, many of the supply bottlenecks that we’re experiencing now in opening up our economy will recede. Sometime during the second half of the year we'll see inflation rates moving back toward the 2 percent that we regard as normal.”

From CBS News’ “Face the Nation,” Nov. 14, 2021: “The pandemic has been calling the shots for the economy and for inflation. And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do. I think it’s—it’s—it’s important to realize that the cause of this inflation is the pandemic.”

Speaking to CNN, Oct. 24, 2021: Yellen stated, “I don’t think we’re about to lose control of inflation ... On a 12-month basis, the inflation rate will remain high into next year because of what’s already happened. But I expect improvement by the middle to end of next year—second half of next year.”

From remarks at the Brooking Institution, April 27, 2022: “From a historical perspective, it is important to emphasize that we have already witnessed a rapid recovery buoyed by a substantial government response—beginning with the CARES Act at the start of the pandemic, and continuing with the Consolidated Appropriations Act in late 2020, and the American Rescue Plan enacted in early 2021. These federal fiscal actions were complemented by an unprecedented response by the Federal Reserve along with relief instituted by national and subnational governments and central banks abroad.”

It doesn’t help that our treasury secretary missed the mark in 2020 and 2021. If she had been more hawkish, perhaps inflation would be a bit less severe.

When Will Biden’s Great Inflation End?

I was part of a Goldman Sachs survey the other day. I selected 2023 as the year inflation will get back below 3 percent. That is merely my opinion and I could be very wrong. However, the options for selection went up to the year 2026. Sadly, there’s little that can be done to stop inflation at the moment. History shows us that returning to normal during bouts of severe inflation can take years and years and years.

Larry Fink, CEO of Blackrock, thinks much the same. Appearing June 2 on “Bloomberg Markets: The Close,” Fink said:

“If you look at the volatility in the market, it’s spread between winners and losers. It’s pretty broad this year. We’ve taken out a lot of those gains that we’ve seen during the COVID years and the two years we were changing our lives, and emphasizing different companies. Now, we’re seeing the reverse impact of that. That’s one of the foundations of it. But now, there’s great recognition that inflation is not transitory, it is probably with us for a number of years.”

While the job market is the strongest seen in decades, inflation is causing serious pain. As gas prices skyrocket across the nation, oil companies are engaging in stock buyback plans and granting executives enormous salaries. Supply bottlenecks, COVID-19, and the Russia–Ukraine conflict have caused issues, but none of these hold a candle to Biden’s spending plan. Biden’s spending was fuel to the geopolitical fire ignited by COVID-19. Now, largely as a result of Yellen’s apathetic view towards Biden’s spending plans, Biden’s great inflation will be with us for years and years to come.