Forget Deflation This Is Stagflation

The Market Oracle ^ | 1-20-2010 | Adrian Ash

[blam]

Forget Deflation This Is Stagflation

Economics / Spain
Jan 20, 2010 - 04:12 PM
By: Adrian Ash

Well, this is a pretty pass. Deflation in all things except inflation...

THEY WERE SUPPOSED to avert depression. The Bank of England continues to tout their "success".

But it looks like the best that money-printing and zero rates might now deliver is '70s-style stagflation, plus '30s-style wealth destruction and a glacé cherry on top.

Giving Britain its "stag" – as in stagnation – are economic output, wages, capital investment, real estate prices and now, perhaps, a return of the bear market in London shares. Whether or not GDP shows an uptick for the end of 2009, this is the deepest British recession since 1931.
Business investment sank to a 6-year low on the last quarterly data, and the number of people out of work for 12 months or more has risen by two-thirds since Northern Rock was bailed out, breaking the dam of bail-outs worldwide in late 2007.

Stepping in with a very 21st century version of drowning, not waving, "The number of people in part-time employment increased by 99,000 to reach a record high of 7.71 million" between September and November '09, says the Office for National Statistics.
"There were 1.03 million employees and self-employed people working part-time because they could not find a full-time job...the highest figure since records for this series began in 1992."

Growth in the money supply, meantime – while not quite negative, as in the technical definition of deflation – has slumped to a 5-year low. But not without the Bank of England's best efforts, remember...

[Touch Not the Cat]

Stagflation — exactly!

[correctthought]

Heck Yeah!, I get to relive the carter years!

Now all we need is long gas lines among other things.

!YaY!

[FastCoyote]

Federal reserve banks should be exchanged for fixed rules. Money is a form of information, and all the central banks get from monkeying with it is to destroy the information signals.

[Touch Not the Cat]

[mjp]

President Jimmy Carter (1977-1981) tried to combat economic weakness and unemployment by increasing government spending, and he established voluntary wage and price guidelines to control inflation. Both were largely unsuccessful.

During the Reagan years, the United States became the outstanding country in which to invest. This was the result of an apparent determination on the part of the Reagan government:

1) to restrain the growth in the money supply
2) to provide a more favorable tax treatment of profits
3) to reduce the extent of its own interference in the economic system
4) high interest rates

[backhoe]