"CBS Sunday Morning" today featured ciommentary by Ben Stein. I like his simple means of explaining complex concepts...today's was stagflation.
He pointed to price increaes largely due to industrial and agricultural commodity hikes of late. China is in short supply, as is Australia and South America. Too many people chasing too few comodities equals inlfation.
He noted that while unemployment and foreclosure are problems, they affect relatively few people, percentagewise; but, inflation affects virtually everyone. True, if you accept that unemployment, which is about double its normal rate nationwide. Foreclosures, which are far worse than that, still only involve a part of that portion of the population that owned a mortgaged home. We all have to eat, eventually buy new clothing, and fuel/energy is factored into every price we pay.
We are noticing gasoline price hikes, of course, and food is going up noticeably. News this week was that clothing will go up quite drastically, due to cotton prices. These demonstrations we are seeing internmationally often haev to do with basic human needs becoming less affordable for the masses. .
In the same timeframe, the FED is printing new money, which devalues all of our currency, and issugin it to banks. Banks are sitting on this money supply. No stimululation of business is being felt, thus no hiring is materializing. Stagnation.
I think that stagflation is the worst case scenario some of you have written about in the past. I believe that I've also heard it called an "inflationary recession," but is that a horse of another color? I've spent a lifetime focusing on the microeconomics of our household and farms. I guess I've always felt that pennies turn into dollars, so tried to hold onto a few when possible.
This is a tough puzzle for me. Macroeconomics is so subject to political manipulation and misrepresentation. I don't know who to believe anymore...but Ben is so easy to understand, I think I will listen to his analysis, at least for now.
