How do you spell stagflation?

http://www.marketwatch.com/news/story/us-unemployment-rate-soars-55/story.aspx?guid={A96DCDDC-68AC-48D7-82AC-753E8583600E}&dist=msr_7

The economy grew in the first three months of 2008, but only by .9 percent. Everyone was happy about that. But now with that big a jump in unemployment in May, it can only mean the next economic numbers are going to be in negative territory. Meanwhile, the Fed is realizing you can only cut interest rates so much. And it's like spitting into the wind. They have a much bigger problem on their hands, because not only is the economy retracting, the cost of living is shooting up. You can pay people to borrow money, and it isn't going to bail out the economy. Not when the loss of purchasing power--fuel and food costs--is spiraling the way it is right now and is only going to get worse.

We have stagflation. There is no easy solution to stagflation. The next two years, at least, are going to be tough on people.

 

Only to the Bush presidency... This is going to be the cherry on top for him. It's not entirely his fault, just as it wasn't entirely Jimmy Carter's fault. But when you're the president and everything falls apart economically at once, you don't get remembered very kindly. Bush isn't going to shoulder it entirely. I don't envy Obama or McCain, if they get elected. They are walking into a mess and whatever they try to do--other than ride it out and stand aside and watch people suffer--they are going to create more of a problem. It's what Carter found out when he did just about everything wrong. If you try to create economic growth, you pour gasoline on the inflation problem. If you try to address to inflation, you cripple the economy even more. There is nothing you can do. I don't have an absolute crystal ball, but I will bet that whoever gets elected president next has a very rough presidency and leaves with some major scars.

Oh, and Ace, I only brag about how well hung I am... Who really cares all that much about spelling?

 

Inflation is when everything is rising in cost... Stagflation is when the economy is in a recession and unemployment is increasing at the same time that everything is rising in cost. Theoretically, the two things shouldn't happen at the same time. When the economy is growing, it usually triggers inflation. Money is relatively cheap, everyone is flush, and everything rises in cost as a result. When money is tight, prices stay really manageable, but the economy suffers because of lack of investment, and people are out of work.

The only thing that ever seems to bring on stagflation--high unemployment and inflation at the same time--is supply shock that is really significant to the economy -- like when the price of oil goes up really quickly at the same time you were facing a recession anyhow. Like the late 70s... and now. We're f'ed.