Open Thread: The Return of Stagflation?

Wednesday, February 20, 2008 | 08:50 PM

Stagfl_20080220 From the front page of tomorrow's WSJ, comes this charming article:

"The U.S. faces an unwelcome combination of looming recession and persistent inflation that is reviving angst about "stagflation," a condition not seen since the 1970s.

Inflation is rising. Yesterday the Labor Department said consumer prices in the U.S. jumped 0.4% in January and are up 4.3% over the past 12 months, near a 16-year high. Even stripping out sharply rising food and energy costs, prices rose 0.3% in January, driven by education, medical care, clothing and hotels. They are up by 2.5% from the previous year, a 10-month high.

The same day brought news that sparked worries of a deepening recession. The Federal Reserve disclosed that its policymakers lowered their forecast for economic growth this year to between 1.3% and 2%, half a percentage point below the level of their previous forecast, in October. They blamed a further intensification on the slump in housing prices, tighter lending standards and higher oil prices. They warned that should the economy's performance differ from its revised forecast, it would be more likely to fall short than outperform."

Of course, none of this is news to any one who has been paying attention (i.e., regular TBP readers). Over the past few years, we have taken to calling the current condition demi-stagflation. Not nearly as bad as the 1970s, but certainly worrisome enough.

The Journal also asked readers: Is the U.S. in a period of stagflation? I found the poll results surprising: Its a full 180 from what we had been hearing from the politicos and pundits: We went from a rather robust denial of inflation, and steadfast defense of growth, to this:


(Let's see if this changes when more votes come in . . .)

Tonite's open thread question: Is Stagflation really back? How much worse is it going to get? Will it be anything like the 1970s (only  without the polyester and disco)?

What say ye?


Fears of Stagflation Return As Price Increases Gain Pace
Fed Cuts Outlook For Economic Growth As Credit Tightens
WSJ, February 21, 2008

Wednesday, February 20, 2008 | 08:50 PM | Permalink | Comments (51) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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the disco would be a plus. line-dancing may be the only way we make it through the next few years

Posted by: scorpio | Feb 20, 2008 9:03:55 PM

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