(Michel Euler/AP photo)
Larry Summers is privately warning that the U.S. economy is “worryingly fragile” and potentially nearing crisis conditions, according to a report that underscores mounting concerns about inflation and federal debt.
The former Treasury chief, who resigned from his role at Harvard University after his friendly correspondence with Jeffrey Epstein was exposed in the Justice Department’s release, has circulated updated analysis to fellow economists suggesting the current economic trajectory bears uncomfortable similarities to past inflation shocks.
The reporting by Semafor’s editor-in-chief Ben Smith on Monday points to a revised version of a controversial chart Summers first shared in 2023, now extended with projections that mirror the late-1970s inflation surge. The updated chart was obtained and published by Smith.
The new version includes a dotted line reflecting market-implied forecasts, which now appear to track closely with the inflation spike seen in 1979.
Summers, who has repeatedly defied consensus forecasts pushed by Republicans and Democrats over the years, is said to believe the U.S. fiscal and economic position would be “worryingly fragile” even in the absence of conflict with Iran, Smith revealed.
According to Smith’s reporting, Summers believes many analysts are underestimating inflation risks and misjudging key indicators, including the so-called “neutral” interest rate, pitching his view against prevailing assumptions inside Washington.
While the Federal Reserve has treated the “neutral” interest rate as around 3%, and Trump-appointed economist on the Fed’s board Stephen Miran has suggested it could be closer to 1%, Summers reportedly believes the figure is significantly higher, at 4.5%.
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