That ‘60s show

Follow Us Get the newsletter Hello. Today we look at whether the 1960s are being repeated in the U.S. economy, how rural India is suffering and the forecasting history of central banks. A History Lesson A new president keen to ease fiscal policy while trying to tackle racial injustice and build a fairer society? Tick A Federal Reserve chairman satisfied with the course of monetary policy? Tick A sharply accelerating economy after a period of low inflation? Tick The parallels between the mid-1960s of Lyndon Johnson and William McChesney Martin and the 2021 of Joe Biden and Jerome Powell are stacking up, as Rich Miller writes. The lingering worry is, as back then, the current combination of easy monetary and fiscal policies sparks a years-long climb in inflation to double-digit levels the following decade. Lyndon Johnson delivers remarks on his Great Society program in Michigan in 1964.Photographer: Francis Miller/The LIFE Picture Collection/Getty Images Former Treasury Secretary Lawrence Summers, a paid Bloomberg contributor, has been among the most vocal in calling out the danger of a redux. He now estimates that "if we do not have a recession that exerts disinflation, the odds are better-than-even that inflation will exceed 3% over the next five years." The Fed has promised to shift gears if there's any sustained, outsize overshooting of its 2% target. "We're all very familiar, at the Fed, with the history of the 1960s and '70s," Powell said in April. But the concern among some is that a newly patient Fed, which is tying policy toward addressing areas of enduring weakness in the job market, might respond too slowly to bubbling price pressures.  "I'm moving a bit in the more alarmed direction, but not to the Summers camp,'' said former Fed Vice Chairman and Princeton University professor Alan Blinder. One key source of comfort has been "anchored" expectations for inflation among investors and the public. Financial markets aren't signaling any panic about inflation, with Treasury yields stable since mid-March. But the late 1960s offers a showcase for how things can change. "History doesn't necessarily have to repeat, but the fact that it happened before does mean it can happen again," said Peter Hooper, global head of economic research for Deutsche Bank. —Chris Anstey Got tips or feedback? Email us at ecodaily@bloomberg.net The Economic Scene India's rural unemployment rate doubled in the latest week, according to an independent think tank as lockdowns imposed by provincial governments forced migrant workers to flee urban areas. That'll harm spending in the consumption-reliant economy. After devastating the biggest cities, the latest Covid-19 wave is now ravaging rural areas across the world's second-most populous country. Today's Must Reads European reopening. A major test of Europe's health and economy is underway as Parisian cafes, Bavarian beer gardens and other businesses begin to reopen. Status anxiety. The euro-area faces elevated risks to financial stability as it emerges from the pandemic with high debt burdens and "remarkable exuberance" in markets as bond yields rose, the European Central Bank said. Be on the lookout for the Bank of Canada's own assessment later on Wednesday. Chip supply. Taiwan's government pledged to try to keep the world supplied with chips even as Covid-19 cases escalate. In the meantime, shortages in the semiconductor industry, which have already slammed automakers, are getting even worse. Level up. British Prime Minister Boris Johnson is refocusing attention on his "leveling up" agenda by unveiling plans to modernize Britain's high streets and move government officials out of London. Meanwhile, the U.K.'s inflation rate doubled in April, marking the beginning of a surge in prices that will fuel speculation about when the Bank of England could start taking its foot off the stimulus pedal. Unimpressed companies. Business groups were unmoved by Treasury Secretary Janet Yellen's call Tuesday for U.S. companies to accept higher taxes in return for a huge public investment in infrastructure aimed at boosting the American economy. China says no. Virtual currencies should not and cannot be used in the market because they're not real currencies, according to a notice posted on the official WeChat account of China's central bank, sending Bitcoin and other major cryptocurrencies lower Wednesday. Need-to-Know Research Bloomberg Economics' dashboard tracking U.S. wage pressures shows pockets of heat, but in general gains for workers remain lukewarm. "Until the unemployment rate falls below 4% — which we don't expect before 2023 — policy makers will likely regard what upward pressure there is as benign," said economist Andrew Husby.  Read the full research on the Bloomberg Terminal by clicking here. On #EconTwitter Still worried about inflation, despite central bank forecasts it's under control? Well maybe it's better to ignore their projections all together: Read more reactions on Twitter  Enjoy reading the New Economy Daily? Click here for more economic stories Tune into the Stephanomics podcast Subscribe here for our daily Supply Lines newsletter, here for our weekly Beyond Brexit newsletter Follow us @economics   Like getting the New Economy Daily? Subscribe to Bloomberg.com for unlimited access to trusted, data-driven journalism and gain expert analysis from exclusive subscriber-only newsletters.   You received this message because you are subscribed to Bloomberg's New Economy Daily newsletter. Unsubscribe | Bloomberg.com | Contact Us Bloomberg L.P. 731 Lexington, New York, NY, 10022