Looks a Lot Like Stagflation…

[RedEarth]

A dark memory still haunts the U.S. economy: The Great Stagflation of 1973-80, a time defined by an uncomfortable mix of high inflation and stagnant growth. Well, everything old is new again, as they say: A number of recent economic reports point to an early 21st century return of the two-headed beast. While nostalgia can be nice—1973 brought delights including the Academy Award-winning best picture American Graffiti and Roberta Flack's classic ballad Killing Me Softly—this is one relic of the not-so-distant past that's best left to the history books.

Unfortunately, the stars may be aligning for stagflation's return. The big implication of the government's recent round of price reports is that inflation is starting to accelerate. The producer price index over the past 12 months has risen 7.4%, according to a government report released Feb. 26—the biggest advance since October, 1981. The consumer price index over the same period is up 4.3% (and in the past three months it has been running at a 6.8% pace). Import prices have risen 13.7% since January, 2007, representing the largest year-over-year increase since the index was first published in September, 1982.

Price Hikes Go Mainstream
Even more disturbing, energy and food are no longer solely responsible for the sharp headline price hikes. The inflation figures increasingly reflect broad-based changes in the economy, affecting the prices of a wide variety of goods, including over-the-counter and prescription medicines, soap and detergents, and platinum and gold jewelry. So much for price stability.

On the other hand, most indications are that the economy is teetering on the edge of a downturn. For instance, the housing market continues to deteriorate with both lower home prices and lower home sales while foreclosures and short sales are rising. The manufacturing sector appears to be stalling out, and corporate payrolls are weak. The Conference Board's consumer confidence index is at its lowest level in 15 years (not counting the impact of the 2003 Iraq war). The dollar is flirting with record lows against the euro.

Add it all up, and it starts to look like the "S" word. "I would call it mild stagflation compared to the 1970s," says Allen Sinai, chief economist at Decision Economics, an economic and financial advisory firm. "But it is probably the same animal."

http://www.businessweek.com/investor/content/feb2008/pi20080226_819023.htm

[Vilis Veritas]

1. At least we are not in a Recession...

Just a Slowdown...heard it from the Chimperor's mouth.

Only slowdown I can see is in his primary brain activity...

[mac2]

2. Stagflation today is not mild. It is ragging headed toward a

world depression. They lie about the numbers (like everything else).

To keep pensioners from getting raises the inflation rate does not include food, gas, or housing increases. The ones who do include them in the price index say we are not keeping up with inflation rates at all.

Manufacturing doesn't just lay off....they disappear forever.

The Euro goes up while the dollar goes down. The EU is destroying us with their wars for oil. We pay for it. They buy up our resources and Common Wealth while we call them friends. Our corporations and banks move there. We allow our friends (the EU) to steal and destroy us. We do not look after our best interests. Why is that? Does that make a bit of sense?

Will we soon be pushing wheel barrows of money down the street to the market?

Impeach this President for ruining our wealthy country in just eight years. We were wealthy and headed up after his father and Reagan Cold War debt and lies. Smaller but bankrupt government is not what we need. It is a lie and a failure. Years of agency legislation and law...trained federal employees gone to be replaced with cronyism. Our security is threatened by it all.

[applegrove]

3. It will be a nightmare if it happens again.

[mac2]

4. Do you remember at one time they said we should be technology

based and who ever did would control the wealth of the world? With it we could become great once again (after our Cold War and Savings & Loan debt).

Well California and the West led the way to being the most progressive and successful computer and technology success in the world. We owned it.

That did not make those Conservative in DC and Wall Street happy. The Progressive Liberals of the West were taking over with their power and wealth. They shared the company profits. They had employees,workers doing very well with great benefits, sharing the profits, etc. Couldn't have that!!

They went after Bill Gates and the computer companies to destroy their Liberal views, power, and wealth. They "outsourced" that technology, markets, and patents to Korea, China, etc. Yes I believe they did that to destroy our success. California has been a target of "RW change" ever since. And not for the better. They paid to remove the Democratic power and put in Conservatives.

When they say we once again should think of new technology and jobs, I wonder if they will remove that and sell it like before. Who are they fooling?

[bulloney]

9. People seem to forget that technology and capital are very portable.

You can have the best technology, but the companies that own it can move it to low-wage countries and exploit that technology at a lower cost. Capital is no longer physically exchanged from buyer to seller, it is transferred electronically.

Corporations are trans-national. They establish operations in countries around the world to take advantage of differences in currency values, enforcement of regulations, etc. They move their production and processing accordingly.

[mac2]

10. It's called "outsourcing".

Not a good thing but for the elite few. Many laws were broke in the transfer of wealth and technology. There are corporate laws in this country which were never enforced. It's not a normal thing nor is it legal.

[BeatleBoot]

5. The Washington Post also weighs in on Stagflation

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/27/AR2008022700967.html?nav=rss_email/components

Fed Open to Rate Cuts, but Still Worried About Inflation

Economic Reports Raise Specter of Stagflation

[BeatleBoot]

6. Self Delete

[BeatleBoot]

7. November 30, 1979 the Prime Rate was.....

15.5%

http://www.hsh.com/indices/prime70s.html

[AdHocSolver]

8. Stagflation: A meaningless bogeyman term invented to scare people and shift blame.

Stagflation: a time of high inflation and stagnant growth. Do not understand that it has everything to do with corporate policies. You must believe that the corporations and the Fed are just as "helpless" to combat stagflation as anyone else.

The term stagflation is hogwash.

Inflation is caused by excessive debt, the loss of jobs to offshoring, which creates that debt (trade deficits), and greedy financial institutions which make risky loans and charge enormous interest rates on credit card debt to cover their losses on those bad loans.

Another cause of inflation is the use of ethanol in gasoline. Ethanol does NOT save oil. It creates a shortage of corn for FOOD for people and livestock. Reduced supply of corn for food means higher prices. The American public is again paying for increased profits for oil and agribusiness corporations.

The U.S. economy is stagnant because all the new jobs created by the corporations are in China and India, rather than in the U.S. The economy was stagnant in the 1980's because American jobs were effectively being shipped by the multinational corporations to Japan, Korea, and Taiwan.

The solution to stagflation is good old protectionism for American jobs. The "protectionism" we currently have through NAFTA, the IMF, the World Bank, and the Fed is for corporate profits. Until Americans wake up to how this economy works against their interests and exclusively for corporate profits, nothing will change.