It's back to the future, kids. Both The Financial Times and The Wall Street Journal ran stories today on an economic phenomenon we have not seen in America since the 1970s. It is called stagflation, which sounds a little like a male deer with bad gas.
In fact, stagflation is a combination of inflation and a weakening economy. Anyone who has walked in to a grocery store in the last 12 months knows the price of many foods has skyrocketed. That's part of another nasty trend called agflation. Wheat, corn, dairy…You name it. The prices are soaring. Add to that a rapidly cooling economy and you have a recipe for stagflation.
Stagflation isn't one of those things turned around by interest rate cuts either. Especially now because while interest rates are low, credit is tight. Big financial institutions which are still bleeding from the continuing subprime blood bath are loathe to loan money in such an unstable atmosphere.
Stagflation leaves us feeling as lousy as the word sounds.
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