I Keep Hoping Larry Summers Is Wrong. What if He’s Not?

“There is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation,” wrote Larry Summers in February 2021. A year later, the debate still rages over the first part of that sentence — the extent to which the American Rescue Plan is responsible for rising prices. But the rest of it is no longer in question: We’re currently experiencing the worst inflationary crisis in decades. Annual inflation was already at its highest rate in decades in January of this year. But there was still a hopeful story you could tell about 2022: As the Covid pandemic eased, spending patterns would normalize, supply chains would strengthen, the labor market would stabilize, and inflation would ease. Then the Russian invasion of Ukraine sent global commodity markets into a tailspin and energy prices to record highs. An Omicron wave hit China, leading to huge lockdowns affecting global supply chains. And while the Fed has responded with the first of many planned interest rate hikes, it looks as though the inflation picture is only going to get worse in the immediate future. For over…