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- Former Treasury chief Larry Summers got panned for posting a graph suggesting US inflation could be tracing the same path now as in the 1970s.
- Nobel laureate Paul Krugman said the chart was “problematic on many fronts”, adding the 1970s story was different.
- Market veteran Jim Bianco slammed the post as “chart crime”, pointing out scale and calculation inconsistencies.
Ex-Treasury Secretary Larry Summers is getting backlash over a chart he recently posted, showing parallels between US disinflation today and the mid-1970s when it reaccelerated.
“This picture should be sobering to anyone convinced that we have reattained price stability,” Summers said in a Thursday post on X.
In another post, Summers urged the Federal Reserve to reject suggestions that inflation is “securely under control.” That’s despite the annual pace of consumer-price increases falling sharply to 3.2% in July, from 40-year highs above 9% last year, thanks to the Fed’s interest-rate increases.
Summers’ chart suggested current inflation is behaving the same way as it did during the 1970s, implying that the recent decline could prove temporary with price pressures rebounding sharply as they did 50 years ago.
But the chart is getting much pushback.
“This is a chart crime on two fronts,” Jim Bianco, 40-year market veteran and president of Bianco Research, said in a post on X.
Summers’ chart used different scales to depict current and 1970s inflation trajectories – making them look similar – and overlooks the fact that consumer price calculation methodology has changed from 50 years ago, he said.
“That said, I agree with @LHSummers that price stability has NOT been attained. My quibble is the chart crime is NOT a good road map of what is coming next,” Bianco added.
Top economist Paul Krugman also panned the chart.
“Lots of people beating up on Larry Summers over his chart making recent disinflation look just like the mid-70s disinflation, which reaccelerated. Indeed, problematic on many fronts. But the biggest issue is that the story was very different,” he said in a post on X.
“Mid-70s disinflation was achieved via a huge rise in unemployment; reasons to wonder what would happen as U came down again,” the Nobel laureate added.
“This time no rise in U at all, so completely different process. Oh, and a lot of the inflation resurgence was about the Iranian revolution and oil prices. Could inflation take off again? Yes. But 1975 is not a useful model of how that might happen,” he continued.
