The S-Word

Monday, August 14, 2006 | 06:16 PM

David Merkel at RM notes that as controversial as the word "Stagflation" is, it is getting more popular as "references to the S-word lately both on the web, in print, and on the radio, but the gains are from a tiny base. Though inflation is rising, and the economy is slowing, the real drubbing that the US economy took in the 1970s is not happening now, and probably won't happen, unless we get some sort of disruption in global flow of goods, services and capital."

A number of people who are presently bearish because they see slowing growth and stronger inflation have nonetheless avoided using the "Stagflation" moniker. The reason is that inflation was so much higher and growth was so much slower in the 1970's than the present economic scenario. Its simply a poor direct comparison, and therefore a more creative phrase is needed:

This morning, Street Insight's Doug Kass calls it "Blahflation;"

back in June, NYU's Nouriel Roubini calls it Stagflation Lite;

In May 2005, I called it Demi-stagflation;

The key takeaway for wordsmiths and investors alike is that we are looking at a somewhat structurally similar economy to the 1970s -- but one that is unlikely to be anywhere near as bad as the 0% growth and 14% inflation of the disco/bellbottoms/Nixon era.

Monday, August 14, 2006 | 06:16 PM | Permalink | Comments (27) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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» Stagflation? from The Everyday Economist
Barry Ritholtz mentions that the talk of stagflation is getting more popular. Google Trends seems to agree: Personally, I am not concerned. ... [Read More]

Tracked on Aug 16, 2006 10:26:30 AM


I've long expected inflation to return. This time, I expect less "stag." Key difference I see is that this time there is no baby boom entering the job market. Sooner or later, I suspect the Fed pushes the limit and the Philips Curve gains better "street cred"........I could be wrong.......... Stagflation wasn't zero growth, it was high unemployment (with inflation.) It discredited the Philips Curve. I think it told us you didn't need low unemployment to have inflation, not that employment levels don't matter. Maybe the longer term question is "could inflation get worse this time?"

So what happened to the hot story on real estate?

Posted by: drewburn | Aug 14, 2006 6:52:45 PM

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