Fun with Google Trends: Stagflation
According to Google Trends, it really is true: Stagflation = Recession plus Inflation
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Stagflation
Recession
Inflation
Wednesday, March 12, 2008 | 01:32 PM | Permalink
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The number of articles published that mention "stagflation" have surged in recent weeks to a new extreme, highlighting investor angst and the headwinds for risky assets.
There is certainly plenty for investors to worry about in the current environment. The global economy and earnings backdrop continues to deteriorate, U.S. housing shows little sign of improving, and the credit crunch continues to intensify. Indeed, it would seem that each positive policy development is met with the fall of another sub-prime related domino. The latest development has been the failure of some investment firms to meet margin calls, sparking fears of forced selling and further deleveraging.
To amplify concerns, energy and food prices continue to surge, helping to stoke inflation fears.
However, we are less worried about broad-based price pressures. It is unlikely that rising commodity prices will lead to a rise in core CPI inflation because manufacturers will be unable to raise prices amidst weak demand. Moreover, the softening job market will help prevent second round effects.
Bottom line: Stagflation has returned as a hot word. However, as occurred the last time stagflation had its moment in the limelight in 1990, weak growth will soon undermine pricing power.
Posted by: Daily Insights | Mar 12, 2008 1:44:51 PM
My question is, what happens if/when Congress gets involved with saving the mortgage market, etc? What happens to equities? And believe they are going to step in!
Posted by: JustinTheSkeptic | Mar 12, 2008 1:54:23 PM
Also fun to check "foreclosure" in google trends - The top search cities - Richardson, TX, Miami, Tampa, Orlando, Atlanta.
side note - google trends is a lot of fun for data geeks.
Posted by: brian | Mar 12, 2008 2:22:00 PM
Google trends, what a cool tool. Why haven't my kids told me about this. It's their JOB!
Posted by: Ross | Mar 12, 2008 2:35:12 PM
Here's another good one: BAILOUT
http://www.google.com/trends?q=bailout&ctab=0&geo=US&geor=all&date=ytd&sort=0
Posted by: N | Mar 12, 2008 2:44:21 PM
History shows that as the economy enters a recession/downturn/slowdown or whatever you want to call it, the FED moves to stimulate activity by cutting rates. That's the cause and inflation is the effect. Once inflation becomes entrenched consumers & companies cut back on spending which tips the economy into the recession/downturn/slowdown that the rate cuts were designed to avoid. We've seen this movie before and it always ends the same way, badly. If they would just leave rates alone everything else would work itself out. But they won't. And there is no reason why they should cut by 3/4 of a point next week but they will.
Posted by: Pat G. | Mar 12, 2008 2:47:10 PM
Oy Barry,
It was fading yesterday afternoon. I got greedy and crazy short (as you said to get crazy short).
I am hurting now underwater.
Should I cover or wait for a pullback?
What if there is no pullback? Oy, I am losing my tokhes. Gezegenen zikh mit gelt. Dos iz a defitsiter gesheft.
Posted by: Es tut mir vey der boykh | Mar 12, 2008 2:57:16 PM
i luv it when CNBC says the spike in oil is "all about the US $". sure, that's some part of it. it's also about the resignation of Admiral Fallon and the rolling October surprise bombing campaign in Iran and Syria. good work, George! good work, Dick! and i mean that. there's really no reason oil should not be much higher and these two bozos and their henchmen will insure that happens.
Posted by: scorpio | Mar 12, 2008 3:06:08 PM
Speaking of stagflation, you gotta love the incredible sinking dollar ... and how key commodities like oil are responding. The economy may stink. But if the dollar continues its long march to confetti-land, then we're going to have rising prices for dollar-denominated commodities anyhow. Speaking of which, I can't wait to see the import price report that's due out tomorrow.
Posted by: Mike_in_Fl | Mar 12, 2008 3:06:30 PM
Es tut mir,
Pokroete Vas Durock!
Posted by: Ross | Mar 12, 2008 3:10:15 PM
2nd's to Pat G.
That's exactly what's gonna happen. For some reason (Greenspan?) we have bought the myth that money matters vis a vis real growth. Sorry, except for a short-term adjustment period, it doesn't. More or less of it relative to real growth just changes the accounting. The reality remains the same. And the reality is that you can't borrow long for short-term wants and needs and expect to get rich.
Posted by: DonKei | Mar 12, 2008 3:11:28 PM
Core rate (ex-food and energy):
1974: 6%
1979: 9%
2008: 2.2%
How about "Stag ex-inflation?"
Posted by: muckdog | Mar 12, 2008 3:13:38 PM
I hope you all took note of CENTCOM Admiral Fallon "resigning" yesterday.
Kiss off any chance of elections.....
and hello to $10 gas...
And Cheney??? Well he's making the rounds starting sunday....
If I was a citizen of Syria or Iran I'd be looking at luggage for an extended "vacation".
What a fucking quagmire we have
Ciao
MS
Posted by: Michael schumacher | Mar 12, 2008 3:24:10 PM
Muckdog,
You might also want to note that core inflation was around 3% in 1972/73. That was a time of USD weakness, BOP and trade deficits, an unresolved and unpaid-for war, and surging food prices.
Posted by: Estragon | Mar 12, 2008 3:39:32 PM
Muckdog, they revamped the core equation back several years...I'm guessing 1997ish?
Posted by: JustinTheSkeptic | Mar 12, 2008 3:40:18 PM
There were 2 basic revisions to the calculation for CPI. Go to Williams 'Shadow Gov Stats' which is linked to this site. He explains it quite well.
We need not rehash the trade down theory or hedonics.
Posted by: Ross | Mar 12, 2008 4:16:08 PM
Core rate (ex-food and energy):
1974: 6%
1979: 9%
2008: 2.2%
How about "Stag ex-inflation?"
You know I've never known anyone alive in my life who doesn't eat and use energy in one form or another. Have you?
Posted by: Pat G. | Mar 12, 2008 5:19:49 PM
The US can pursue any basket of policies it can come up with. If the decline in the exchange rate of the dollar isn't stopped & the current account deficit isn't eliminated the US will be forever saddled with stagflation.
Posted by: flow5 | Mar 12, 2008 5:33:01 PM
When I was very young, my memories of the 1970s and stagflation were; high gas prices and things were not getting done like; road maintenance, building painting, auto body repair, people were being treated badly and most people were grumpy and did not care. No one trusted the government, and I think the basic problem was oil prices, and businesses have to raise their prices.
The markets should be afraid of stagflation and the lower U.S. dollar.
“We have seen better days.”
William Shakespeare
Posted by: David | Mar 12, 2008 8:34:17 PM
The last time this occoured you could buy a BMW and resell it a year later for what you paid for it.... now about those mclass cars....
Posted by: alexd | Mar 12, 2008 10:26:36 PM
