If only this were the '70s: 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

[whistle]

1. No, this is hyperinflation and currency devaluation by the Federal Reserve printing mountains of

...Federal Reserve notes backed by nothing. It is the Wiemar German Republic model of 1920 to 1923 all over again

[newportdadde]

2. Very good article, it will drop like a fly but thank you for sharing.

[marmar]

3. Thank you.....Weighty topics tend to do that on DU.

:)

[lonestarnot]

4. So we're all going to the party in stag!

[Zodiak]

5. They are going to take beyond the breaking point

Then they are going to wait and see if we do anything about it.

If we don't, then they will push us the rest of the way into third world status and wage slavery forever.