"The Return of Stagflation" - WSJ

Tuesday, May 24, 2011
"'Stagflation" is an ugly word for an ugly situation: persistent high inflation combined with high unemployment and stagnant demand in a country's economy. The term was coined by British politician Iain Mcleod in a speech to Parliament in 1965. We haven't experienced it here in the United States since the bad old days of the 1970s. Yet with prices on the rise and unemployment still high, the U.S. economy again seems to be entering stagflation. April's producer price index for finished goods, which excludes services and falling home prices, rose 6.8%. The Bureau of Labor Statistics reports that intermediate goods prices for April were rising at a 9.4% annual clip. Meanwhile the official nationwide unemployment rate is mired close to 9%, without counting a large backlog of discouraged workers who are no longer officially in the labor force. So stagflation it is. Although many forces buffet the U.S. economy, the near-zero interest rate policy of the Federal Reserve is the prime contributor to the current bout with stagflation." Read more. "The Return of Stagflation" Ronald McKinnon Wall Street Journal, May 24, 2011. Image by Evgeni Dinev / FreeDigitalPhotos.net.

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