Former US Federal Reserve chairman Ben Bernanke said the central bank’s current leaders were too slow to react to surging US inflation and, as a result, faces a period of stagflation — a combination of stagnant growth and high inflation.
“The forward guidance, I think overall, on the margin, slowed the response of the Fed to the inflation problem,” Bernanke said in an interview broadcast on CNBC on Monday. “I think, in retrospect, yes, it was a mistake and I think they agree it was a mistake.”
Fed Chairman Jerome Powell and his colleagues chose to respond gradually to surging inflation because they did not want to shock the markets with a repeat of the so-called taper tantrum in 2013, when US Treasury yields surged suddenly under his leadership, Bernanke said.
At the same time, he warned the outcome of such a slow response was going to be a poor economic performance.
“Even under the benign scenario, we should have a slowing economy,” Bernanke told the New York Times separately.
“And inflation’s still too high, but coming down. So there should be a period in the next year or two where growth is low, unemployment is at least up a little bit and inflation is still high,” he predicted. “So you could call that stagflation.”
It is highly unusual for a former Fed chair to criticize a successor; recent chairs Alan Greenspan and Janet Yellen have seemed to go out of their way to avoid criticism. Bernanke’s comments were notable as an exception, albeit carefully worded to not be especially harsh.
Bernanke made his comments as part of media appearances before the publication of a new book, 21st Century Monetary Policy.
Separately, Elon Musk said that the US economy was “probably” in a recession — a judgement at odds with economists and available data — and cautioned companies to watch costs and cash flows.
“These things pass and then there will be boom times again,” Musk told the All-In Summit in Miami Beach, according to a livestreamed video of his remarks posted by a Twitter user. “It’ll probably be some tough going for, I don’t know, a year, maybe 12 to18 months.”
Recession fears have been growing recently as the Fed tightens monetary policy to help cool down inflation that is running near its hottest pace since the early 1980s.
The Fed increased rates by a half point earlier this month, the largest single hike since 2000, and Powell said similar moves were on the table for the next two meetings.
Officials also announced they would start shrinking their US$9 trillion balance sheet from June 1 at a pace that would step up quickly to US$95 billion a month.
Still, odds of a downturn in the coming year currently stand at 30 percent, according to the latest Bloomberg monthly survey of economists.
While the US economy shrank an annualized 1.4 percent in the first quarter, the weakness was primarily due to a record trade deficit. Measures of demand — consumer spending and business investment in equipment — actually quickened at the start of this year.
The Federal Reserve Bank of Atlanta’s GDPNow estimate currently has second-quarter GDP rising at a 1.8 percent pace.
Musk, the CEO of Tesla Inc and SpaceX, made the comments on the economy and politics as part of a wide-ranging video appearance at the technology conference.
He suggested that recessions are not necessarily a bad thing, adding that he has been through a few of them in his time at public companies.
“What tends to happen is, if you have a boom that goes on for too long, you get misallocation of capital — it starts raining money on fools, basically,” he said.
Taiwan Semiconductor Manufacturing’s (TSMC, 台積電) first wafer fab in Kumamoto, Japan is still set to launch commercial production in the fourth quarter of this year as planned, the world’s largest contract chipmaker said on Saturday in response to reports that mass production might begin ahead of schedule. TSMC said the monthly production capacity of the joint venture fab, Japan Advanced Semiconductor Manufacturing (JASM), is expected to hit 55,000 units of 12-inch wafers, using the mature 12-nanometer, 16-nanometer, 22-nanometer and 28-nanometer processes. JASM is owned by TSMC and its Japanese business partners Sony Semiconductor Solutions Corp and Denso Corp, with the Taiwanese company
US President Joe Biden’s administration is in talks to confer more than US$10 billion in subsidies to Intel Corp, people familiar with the matter said, in what would be the largest award yet under a plan to bring semiconductor manufacturing back to US soil. Intel’s award package is expected to include both loans and direct grants, the source said. They stressed that negotiations are still under way. The US Department of Commerce and Intel declined to comment. The incentives would come from the 2022 Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, which set aside US$39 billion in direct grants as
A new artificial intelligence (AI) tool that promises to create short videos from simple text commands has raised concerns along with questions from artists and media professionals. OpenAI, the creator of ChatGPT and image generator DALL-E, on Thursday said it was testing a text-to-video model called “Sora” that can allow users to create realistic videos with simple prompts. The San Francisco-based start-up said that Sora can “generate complex scenes with multiple characters, specific types of motion, and accurate details of the subject and background,” but added that it still has limitations, such as possibly “mixing up left and right.” Examples of Sora-created clips
Super Micro Computer Inc’s lengthy rally came to a shuddering halt on Friday, with a selloff that derailed what had looked to be the server maker’s best week on record. Shares fell 20 percent, their biggest one-day percentage drop since August last year. The decline comes in the wake of a nine-session run of gains, the longest such streak for the stock since 2016. However, even with the day’s selloff, the stock rose 8.5 percent for the week. Despite Friday’s drop, recent gains show how Super Micro has become one of the hottest names in artificial intelligence (AI). The stock has risen