Industrial Insight

Inflation is already lurking… | February 19, 2010 MURPHY: Setting the stage for stagflation

“The typical view is that an economy in a deep recession is in no danger of price inflation. This belief is wrong both in theory and in practice. The classic explanation of price inflation is too much money chasing too few goods. During recessions in the postwar period, the Fed typically opens the monetary spigots at the same time that the output of goods and services is falling. Therefore, other things being equal, we would expect inflation to go up during recessions.

The historical data are generally consistent with this conclusion. The worst bout of inflation during the postwar period occurred during the economic slump of the late 1970s and early 1980s. More recently, consider that in 2006, the inflation rate was slightly lower than last year’s figure even though the unemployment rate in 2006 was only half of the average for 2009.”

Posted in Uncategorized

Leave a Comment »

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.







%d bloggers like this: