Dissident economist Larry Summers was right all along about inflation. His new, ominous prediction of what was to come.

Too far, too fast? This is what some portfolio managers have absorbed as the stock market plunged in the wake of the Federal Reserve’s latest rate hike on September 21. Jay Hatfield, CEO of Infrastructure Capital Management, said, luckarguing that the central bank’s rate hike is now overly aggressive.

But Larry Summers, a Harvard economics professor and former Treasury secretary, has a very different view. In a long interview with Fortune at his home outside Boston, he argued that the Fed must go much higher than most expect to quell hyperinflation. In fact, his biggest concern was that the Fed would also back down thus. It would be very painful – too many jobs lost, too many 401(k)s crashes, too many backlashes. This is compared to fighting an infection. “Most of us have learned that [when] Your doctor prescribes you a course of antibiotics and you stop taking the course when you feel better and not after the prescribed course is over, your condition is likely to recur. And it will likely be more difficult to eradicate next time because the bacteria are becoming more resistant.” Summers fears that if the Fed backs down, “inflationary expectations will take hold,” and the eventual cure will be much more expensive than enduring what could be shorter and less slowing in months ahead.This repeats what he said in June: “We need five years of unemployment above 5% to contain inflation – in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment”, Summers said in a speech in London, according to Bloomberg.

Summers never bought into the “temporary” argument, that inflation was a transient phenomenon caused by supply chain bottlenecks and COVID-related shutdowns.

For Summers, the main source of heavy inflation today is excessive demand caused by too much money chasing too few commodities. So in order to stifle the runaway CPI, the Fed must continue to tighten monetary policy to the point where demand drops sharply. How far does Summers think the Fed should go?

How long will inflation last?

Access to answers is a precursor to Summers’ view that the core of economics is arithmetic. He believes “core inflation,” excluding food and energy, is between 4% and 4.5%, very close to the PCEPI figures that guide the Federal Reserve. (PCEPI is calculated by the Bureau of Economic Analysis and used extensively by the federal government, including to adjust Social Security payments.) In Summers’ book, taming inflation requires a “real” rate on federal funds 1.0% to 1.5% higher than the pace of core inflation. .

By his estimation, the correct number is 5.0% to 5.5%. This is well above the current Fed fund benchmark of 3.1% midpoint. Of course, markets and most observers expect the Fed to rise again in the next several meetings. But the Fed-funded futures markets, and members of the Open Market Committee in their latest survey, expect the number to reach a maximum of 4.6% next year. So Summers calls for a much higher interest rate on the fed funds, and tighter policies than investors or the Fed itself would expect.

You can read in full luck View Summers’ views on inflation, the economy, and more here.

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