Inflation is rising. Growth is falling. And oil prices are at record levels.
What’s happening today seems reminiscent of the situation in the 1970s and 1980s, during the years of stagflation.
But we couldn’t find a single economist that would make that case that stagflation is even a possibility on the horizon. All agreed there are important differences today that make a similar situation unlikely.
For example, back, then inflation was more than twice the level it is now—in the double digits.
Unemployment was also much higher. According on one source, the jobless rate was 8.5 percent in 1975, roughly half the rate last year.
Against that backdrop, the situation today doesn’t look quite so bad.
That said, even if the US technically doesn’t enter stagflation, it doesn’t mean we won’t feel pain.
What are your recollections of the economic climate in the late 70's/early 80’s? Any memories you’d like to share?
Comments
14 March '08
Reminders of the '70s. I started to see that two years ago, but I think it will playout differently.
The reason I am writing today is in reference to Xinhua: "China Central Bank drains 236bln yuan in open market operations"... that's $33BBillion from the interbank market. What effect is this going to have? And with the Bear-Sterns "BAILOUT" today, probably a "wire has been tripped" (like the 10 March 2000 comments by Blair and Clinton on biotech started a two week downturn in that sector followed by the 2 1/2 year bear market).
Personally, I sense an imminent crash. Do any of you have any info or opinion?
Nobody, least of all economists, have the faintest idea what's going to happen.