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04/18/2005: Return of Stagflation??
Paul Krugman (NY Times) has this important piece about Stagflation.”In the 1970's soaring prices of oil and other commodities led to stagflation - a combination of high inflation and high unemployment, which left no good policy options. If the Fed cut interest rates to create jobs, it risked causing an inflationary spiral; if it raised interest rates to bring inflation down, it would further increase unemployment.
Can it happen again?
Last week fears of a return to stagflation sent stock prices to a five-month low. What few seem to have noticed, however, is that a mild form of stagflation - rising inflation in an economy still well short of full employment - has already arrived….”
Worth a read through the whole article by clicking on the link above, especially for those of you too young to appreciate those Stagflation Days of the 1970’s and what they may mean to the current economy.
Karen on 04.18.05 @ 05:34 AM CST
