Friday, September 30, 2011

What Bernanke Hath Wraught: "Hello, neo-stagflation"

I've had some folks tell me it is a deliberate attempt to cause the middle and working classes so much pain, a type of Cloward-Piven strategy but focused a couple rungs up the socio-economic ladder, that they will be amenable to massive societal change.

I don't know about that, the powers that be don't invite me to their meetings and it does sound a bit tin foil hat-ish.
From the Globe and Mail:

Stagflation: Scourge of the ’70s stalks us still 
As we teeter toward what could be the third U.S. recession in a decade, experts can’t help but sift through economic history to look for precedents. The eye is immediately drawn to the last decade of the recession trifecta – the 1970s.

That lost decade for the economy and the stock market was marked by a set of conditions so glaring that they popularized a previously obscure economic term: stagflation.

You’d think stagflation – the combination of high inflation and stagnant economic growth – would be of little help in understanding our current decade. After all, inflation rates in North America are running at a little over 3 per cent, compared with about 13 per cent at the end of the 1970s.

But veteran portfolio manager Don Coxe thinks there’s a new kind of stagflation. It may not be as dramatic as the stagflation that crippled the 1970s, but it may help explain the stalled economic and equity-market cycle.

Hello, neo-stagflation
Mr. Coxe, chairman of Coxe Advisors LLC and an adviser to BMO Nesbitt Burns, argues that while overall consumer price inflation has been fairly tame so far by historical standards, a form of “neo-stagflation” has emerged. Indeed, this trend is visible in looking at economic growth versus the inflation rate over the past several years, and has accelerated this year – inflation is clearly climbing while economic growth is stagnant.
This neo-stagflation is characterized by rising prices for food, fuel and metals – which were also key drivers in the 1970s stagflationary spiral.

“An OECD economic cycle in which prices of foods, fuels and precious metals rise far more strongly than prices of manufactured goods – or workers’ wages – is inherently stagflationary,” he wrote in a recent report. “A greater and greater share of total consumer spending goes to the commodity producers who own the farmland, the mines or the oil wells....MORE
HT: Cryptogon