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Feb.29.2008

Oh no, stagflation!

Ohh nooooooooooo!
Sluggo says, "STAGFLATION!!"

Mr. Bill: "What's it gonna cost me?"

Sluggo: "An arm and a leg, Mr. Bill!"

You know the rest. This bit from the seventies is perfect, because the seventies are back. Here is a story that was out Wednesday:

'Stagflation' may be on the way
By JEANNINE AVERSA - Wed. Feb. 27, 2008
WASHINGTON (AP)-- It's a toxic economic mix the nation hasn't seen in three decades: Prices are speeding upward even as the economy loses steam. Economists call the disease "stagflation," and they're worried that it might be coming back.

Already, paychecks aren't stretching as far and jobs are harder to find, threatening to set off a vicious cycle that could make things worse.
The economy nearly stalled in the final three months of last year and is nearly flat now. That's the "stagnation" part of the ailment. Typically, that slowdown should slow inflation as well -- the second part of the diagnosis -- but prices are still marching higher.
Then come the denials. To Bush and his money guy Bernanke, what they say has nothing to do with what is quacking like a duck:

Bernanke Doesn't See Return of '70s Woes
By JEANNINE AVERSA – 1 day ago
WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke told Congress Thursday that the nation isn't "anywhere near" the dangerous stagflation situation of the 1970s.

With the economy slowing and inflation rising, fears have grown that the country could be headed for the dreaded twin evils of stagnant growth and rising prices known as "stagflation."

"I don't anticipate stagflation," Bernanke told the Senate Banking Committee. "I don't think we're anywhere near the situation that prevailed in the 1970s."

"I do expect inflation to come down," he added. "If it doesn't, we will have to react to it."

High energy prices and rising inflation do complicate the Fed's job of trying to keep the economy growing and inflation contained, Bernanke acknowledged.
Let's see, oil found $103.50 today, and the dollar is is freefall, sinking as low as E1.5229. Indeed, this is energy-driven stagflation. Welcome back to the seventies. Bernanke and the overlords are shaking in their boots and the only reason they argue in public it isn't true is for market psychology. But it won't work. Everybody is beginning to figure out the truth.

Posted by The Owl at 16:18. Filed under: Economy

Comments

Maybe we need to invade more countries?

ANN CURRY: Some Americans believe that they feel they’re carrying the burden because of this economy.

PRESIDENT GEORGE W. BUSH: Yeah, well—

CURRY: The economy, they say, is suffering because of this war.

BUSH: I don’t agree with that.

CURRY: You don’t agree with that? It has nothing to do with the economy, the war, the spending on the war?

BUSH: I don’t think so. I think, actually, the spending on the war might help with jobs.

CURRY: Oh, yeah?

BUSH: Yeah, because we’re buying equipment, and people are working. I think this economy is down because we built too many houses.

Posted by on Mar.01.2008 at 10:26

I think Bush unwittingly stepped into a long-running debate about the deleterious effects of the military-industrial complex (war production) on the American economy.

Guess who comes up when you search on these issues? Here is a terrific article on the matter:

http://www.counterpunch.org...

"The military economy drains the civilian economy and this trend has been accelerating into what [Seymour] Melman called a 'huge change' in the American economy. He writes: 'This deindustrialization has happened so quickly that America's capacity to produce anything is seriously undermined. For example, last year [2002] the New York City government announced its plans to buy a new fleet of subway cars. Though this contract is worth $3-4 billion, not one U.S. firm responded. Of 100 products offered in this fall's L.L. Bean catalogue, 92 are imported and only 8 are made in the U.S.A.'"

Bush obviously is too uneducated to even know what he's talking about. Maybe a refreshing wind blown in with President Obama could include a Seymour-Melman-like figure for some much-needed big restructuring away from a Pentagon-dominated system of local economic military dependence?

Lots of luck. This is a HUGE problem for America, but there's precious little discussion and alternatives don't seem be on the table. Just the opposite so far, Obama thinks expanding the military is going to be some sort of solution for all these deployments.

Posted by The Owl on Mar.01.2008 at 12:37

A little more search found that Counterpunch a few weeks later in March 2003 carried the full Melman memorandum:

http://www.counterpunch.org...

Oh, and Gerald, thanks for bringing this up. It's right at the crux of the matter for explaining the current economic conditions and the total ignorance of Bush. I just wish the Democrats had more courage to meet this head on.

Posted by The Owl on Mar.01.2008 at 12:44

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