Stagflation is back, but the outlook is grimmer this time

[marmar]

from MarketWatch:



If only this were the '70s
Commentary: Stagflation is back, but the outlook is grimmer this time
By Dr. Irwin Kellner, MarketWatch


Last update: 11:05 p.m. EDT June 9, 2008

PORT WASHINGTON, N.Y. (MarketWatch) -- Which is worse, wages that keep up with inflation or wages that don't?

Nowadays, a lot of comparisons are being made to the 1970s. This is because the U.S. economy is once again in the throes of stagflation.

The combination of little or no growth (stagnation) and rapidly rising prices (inflation), the term stagflation was first coined by Iain Macleod, the chancellor of the exchequer, in a speech to the House of Commons in 1965.

He said, "We now have the worst of both worlds -- not just inflation on one side or stagnation on the other, but both of them together ... sort of a stagflation situation."

At first glance, it does appear to be déjà vu all over again.

The economy has barely grown over the past six months, leading to falling employment and a jump in the jobless rate. Meanwhile, consumer prices are up nearly 4% over the past year with energy, food and health care -- the mainstays of most households -- rising several times faster.

Not surprisingly, inflation psychology has begun to heat up. As I reported two weeks ago, consumers now expect prices to rise a whopping 5.2% over the next year -- the most since the bad old days of 1982. See May 26 column

But are they doing anything about it, such as buying in advance or demanding higher wages? The answer, from what I can tell, is no.

Hoarding is impractical for most. In the case of goods like food or energy, most have no room; in the case of services such as health care, they can't. And, of course, their buying power is falling because wages are not keeping up with the jump in prices. ......(more)

The complete piece is at: http://www.marketwatch.com/news/story/story.aspx?guid=%7B4D9BD801%2D7274%2D48F3%2DAFE9%2D75DF268CEC6E%7D

[CC]

1. Reminds me more of the Reagan years

but then since it is repukes doing the comparing no way they would say it reminded them of the 80s.

[pansypoo53219]

2. how come all the teevee and raydeeo experts

kept saying no stagflation possible, but little ole pansypoo, an ARTIST, has been predicting it for years? i only got a fewq pages into greider's book on the fed.