McClatchy: Greenspan sees threat of '70s-style inflation

[babylonsister]

Greenspan sees threat of '70s-style inflation
By Kevin G. Hall and Robert A. Rankin | McClatchy Newspapers

* Posted on Thursday, September 27, 2007



WASHINGTON —An important point in Alan Greenspan's much-hyped memoir has gone largely unnoticed: He acknowledges that global economic forces, more than Federal Reserve policy, kept inflation low and manageable for two decades.

By global forces he means free trade, the rise of emerging, cheap-labor economies led by China and India and the benefits from information technology and the Internet.

He warns that these forces — "globalization," in shorthand — are weakening as they mature. He fears that could mean a gradual return to persistent 1970s-style inflation over the next 20 years or so. And he worries that could cripple a U.S. economy that's already facing strains from the graying of the population over the same period.

Not everyone agrees.

"I do think he's overly pessimistic. Which is not to say things he's pointing to aren't real or potentially real," said Alan Blinder, a former Fed vice chairman and Princeton University economist who thinks that U.S. and European policymakers are unlikely to let inflation get out of hand because they learned hard lessons in the '70s.

more...

http://www.mcclatchydc.com/227/story/19988.html

[fasttense]

1. A threat of inflation???????

According to those numbers, we have had about 539.% inflation during the past 34 years. That comes to about 15% per year. Greenspin was the Fed Chair for the last 18 years. So, I guess inflation was contained during those years?

[scisyhp1]

3. No, it doesn't. It comes to average of 5.1% a year.

But it does compound.

[Odin2005]

2. We are already there. The real inflation rate is 10%.

That 2.5% number is funny bookkeeping done by removing necessities like food and fuel, which tend to inflate more rapidly then other goods, from the inflation calculations, which is why that 2.5% number is called the "core" inflation rate.

[Javaman]

4. oh god, does this mean disco is back...

I hope my punk leathers still fit.